Trump, and his congressional Republicans cohorts, promised a huge tax cut for the middle class. But the plan they have revealed does not do that. The biggest cuts go to the corporations and the richest people. They did double the regular deduction for an individual or family, but then they eliminated other deductions many in the middle class depend upon. This means some middle class people will get a small tax cut, others will pay the same as now, and some will actually have to pay more.
This is not surprising. The promise of a huge middle class tax cut was always a lie -- designed to allow them to give massive tax cuts to corporations and the rich. Here are some deductions, according to Forbes (written by Tony Nitti), that the middle class will lose:
#1: Divorce just got even more expensive.
Under current law, alimony payments are deductible by the payor, and considered taxable income to the payee. And because you people are simply incapable of remaining faithful, there is a lot of alimony paid each year, about $10 billion to be exact.
The House bill eliminated the deduction for alimony. The change doesn't add much revenue, however, because the bill also makes alimony tax-free to the recipient. As a result, it raises only $8 billion over ten years, almost entirely from Larry King.
#2: Don't be in a rush to sell your house.
When you sell your home, provided you have owned and used the home as your primary residence for two of the prior five years, you may exclude up to $500,000 of the gain (if married, $250,000 if single).
The House bill would require that, in order to exclude the gain from a sale, you own and use the house as your primary residence for five of the prior eight years. In addition, you begin to lose the exemption as adjusted gross income (in a look-back period) exceeds $500,000 (if married, $250,000 if single).
#3: Don't get sick. Or move. Or go back to school. Or do anything, really.
Taxpayers may deduct medical expenses incurred to mitigate, diagnose, treat a disease. Today's bill would eliminate the deduction for all medical expenses. This will prove particularly damaging to the elderly, many of whom have traditionally relied on the deduction for a portion of their nursing home care to wipe out any income they use to pay those expenses.
In addition, if you have to move for a new job, you generally may deduct the cost to transport your belongings to your new home. Generally, your new gig must be at least 50 miles farther from your old house than your old gig. In other words, your commute, had you not moved, would have grown by 50 miles.
Today's bill will eliminate the moving deduction. But don't let a lost tax deduction motivate you to hire a low-budget moving company. My wife and I tried that once and ended up engaging the services of what I can only assume was the Russian mob. Needless to say, things did not go well, at least until I paid three grand to get my stuff out of a storage locker in Kansas.
Finally, if you're an employee who was thinking of going back to school for a graduate degree in your particular business field, you may want to think twice. Under current law, your employer can pay up to $5,250 of your tuition, books, etc. . . and you don't have to recognize the payment as income. Alternatively, if your employer won't pay for you to go to school, you may deduct any unreimbursed educational expenses, provided the education simply maintains or improves your existing skills, and doesn't prepare or qualify you for a new trade or business.
Today's bill would eliminate BOTH the ability to receive tax-free educational assistance from your employer and the unreimbursed employee expense for professional education. So if the employer pays, you're recognizing taxable income, and if you pay, you get no deduction. I guess it makes sense for the GOP to discourage education; after all, if the country wises up, what happens to Fox News? HI-YO!
#4: Every day will be "Bring your kid to work day!"
Similar to educational assistance, an employer may pay directly or reimburse up to $5,000 for an employee's dependent care expenses, without the employee having to recognize the income. This allows the employee to seek care for a child under 13 on a tax-free basis.
Well, get ready to spend considerably more quality time with Junior, because today's bill would eliminate the exclusion. As a result, any amount the employer pays on your behalf or reimburses you is taxable income.
#5: You didn't think it was possible, but somehow your student loans just became a BIGGER hassle.
Taxpayers can deduct -- up to certain limits -- the interest paid on student loans. Even better, the deduction is not an itemized deduction, so every taxpayer is eligible, though the deductions do disappear as income exceeds fairly moderate thresholds.
The House bill would eliminate the deduction for student loan interest, leaving you without even a tax benefit to show for that ill-advised philosophy degree.
#6: Time to fire your tax preparer (note: do not fire your tax preparer).
Nobody likes their tax preparer. Trust me, I know. I'm one of them AND I'm surrounded by them all day. We're the worst. But at least in the past, you could stomach your interactions with people like me because you knew that every penny you paid me was tax-deductible.
Well, no more...the House bill eliminates the deduction for tax prep fees. But don't let that discourage you from offering up a healthy tip. I've got kids to feed.
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