Previously, we discussed the that the most realistic baseline scenario regarding tax legislation is that there is a repeal of the ACA and associated taxes. While at this time, it is unclear what a replacement bill may look like.
Tag Archive for Tax Breaks
For years, there have been promises by both Republican and Democratic lawmakers to reform our tax code. I’m not sure if many of you recall that in 2010 there was a bi-partisan commission convened by President Obama, “Simpson Bowles” to draft a proposal on reforming our tax code. What happened? The Commission presented its report to Congress, but they refused to do anything.
With the first chill of fall most people’s thoughts turn to the activities of autumn: Football, Thanksgiving, pumpkins, apples, (did I mention football?) and, of course, the holidays.
For those looking to limit how much they give to Uncle Sam at tax time, this is also the time to turn your thoughts to giving to a favorite charity.
It’s a new dawn, a new day, and we have a new President.
Whether we enjoy the benefits of the reforms he has promised remains to be seen. For those of you who are not aware of the promises Trump has made regarding tax reform, I’ve provided them for you below.
For the past few years, year-end tax planning has been challenging due to the lateness of action by Congress. This year is no different because of uncertainty over whether Congress will extend any of the many expired or expiring tax provisions. However, regardless of what Congress does later this year, solid tax savings can still be realized by taking advantage of tax breaks that are still on the books for 2015. For individuals and small businesses, these include:
• Capital Gains and Losses – You can employ several strategies to suit your particular tax circumstances. If your income is low this year and your tax bracket is 15% or lower, you can take advantage of the zero percent capital gains bracket benefit, resulting in no tax for part or all of your long-term gains. Others, affected by the market downturn earlier this year, should review their portfolio with an eye to offsetting gains Read more
Confused about which credits and deductions you can claim on your 2014 tax return? You’re not alone. Here are six tax breaks that you won’t want to overlook.
1. State Sales and Income Taxes
Thanks to last-minute tax extender legislation passed last December taxpayers filing their 2014 returns can still deduct either state income tax paid or state sales tax paid, whichever is greater.
Here’s how it works. If you bought a big ticket item like a car or boat in 2014, it might be more advantageous to deduct the sales tax, but don’t forget to figure any state income taxes withheld from your paycheck just in case. If you’re self-employed, you can include Read more
In late December Congress finally took action, passing the tax extender bill, officially known as the Tax Increase Prevention Act of 2014 (H.R. 5771), which was signed into law by President Obama.
The good news is that these tax provisions are retroactive to January 1, 2014. The bad news is that they expired on December 31, 2014. Even so, you might be able to take advantage of them when you file your 2014 tax return. Let’s take a look at some of the tax provisions most likely to affect taxpayers when filing their 2014 tax returns.
1. Teachers’ Deduction for Certain Expenses
Primary and secondary school teachers buying school supplies out-of-pocket may be Read more
Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them, which, at the present time, looks doubtful. These include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70-1/2 or older from IRAs for charitable purposes.
Some areas to draw your attention are listed below:
NEW HIGH INCOME SURCHARGES
High-income-earners have other factors to keep in mind when mapping out year-end plans. Read more
The New York Times Editorial Board has written an editorial condemning tax breaks, which is justified, in part. They point out:
Tax breaks work like spending. Giving a deduction for certain activities, like homeownership or retirement savings, is the same as writing a government check to subsidize those activities. Functionally, they mimic entitlements. Like Medicare, Medicaid and Social Security, they are available, year in and year out, in full, to all who qualify. Yet in budget talks, Republicans ignore tax entitlements, which flow mostly to high-income taxpayers, while pushing to cut Medicare, Medicaid and Social Security.
While they point out that the deduction for homeownership is the same as writing a government check they go on and only point out the special deductions/entitlements they feel are the ones the rich take advantage of:
CARRIED INTEREST. This loophole lets private equity partners pay tax on most of their income at a top rate of 20 percent, versus a top rate of 39.6 percent for other high-income professionals. It drains the Treasury of $13.4 billion a decade, and should be closed, along with a shelter recently enacted in Puerto Rico that would help shield the income of individuals whose taxes would rise if the carried-interest tax break was eliminated.
NINE-FIGURE I.R.A.’S. Remember Mitt Romney’s $100 million I.R.A? Private equity partners apparently build up vast tax-deferred accounts by claiming that the equity interests transferred to such accounts from, say, their firms’ buyout targets are not worth much. No one knows how much tax is avoided this way. What is known is that I.R.A.’s are meant to help build retirement nest eggs, not to help amass huge estates to pass on to heirs.
‘LIKE KIND’ EXCHANGES. As reported in The Times by David Kocieniewski, this tax break was enacted some 90 years ago to help farmers sell land and horses without owing tax, as long as they used the proceeds to buy new farm assets. Today, it is used by wealthy individuals and big companies to avoid tax on the sale of art, vacation homes, rental properties, oil wells, commercial real estate and thoroughbred horses, among other transactions. Government estimates say this costs about $3 billion a year, but industry data suggest the amount could be far higher.
While these entitlements, which can be abused egregiously, they are not the only ones. What Congress really needs to do is discard the entire tax code except for §61 which defines income as:
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived …
Starting with that clean slate they should only allow exceptions for those exceptions which are willfully, intelligently and fully understood when put in place. No passing them so we can read the bill later.
These exceptions to income should be subject to hard and fast sunset provisions with the continuing of the exceptions only after detailed review and assessment that the purpose for which it was provided still is valid.
The tax code should not be used for social policy reasons. Examples are numerous but some of them are:
1. Education Credits – to promote higher education for a certain group of citizens … discrimination to “fix” discrimination.
2. Earned Income Credit – the largest area of fraudulent returns.
3. Child tax credits … paying people who cannot afford to have children to have children.
4. Mortgage Interest Deduction … started with the tax code of 1952 to help enable the returning veterans buy homes … something Congress deemed a good social goal.
5. Child Care Credit … to allow single mothers the ability to work … a worthy cause I am sure but one that does little to discourage out of wedlock children, single parent homes, latch-key children, the cycle of children who are brought up thinking this sort of life style is appropriate.
Some will think I am harsh by the entitlements that I point out. I am not trying to say that none of them are valid I am just arguing that there should be no sacred cows. No matter which section of the tax code you try to eliminate someone’s ox is being gored. It is time to start over with the clean slate.