What New Tax Plan?

ORLANDO

By Orlando Gotay, Tax Attorney

After several waiting weeks (make that months) and enduring endless tweets in August, we seem to have a (drum roll please) tax plan. I said plan, because that’s what it is. A plan cannot become law. There is no bill, no “language”—as one refers to what actually may someday become a law. Still, there are some guideposts to look at.

You may wonder why there is not a bill yet. The answer is simple. The majority is seeking conceptual “yeses” on a general idea, getting “commits” for it, and then reducing the idea to actual legislative language.

Let me walk you through some of the highlights I think are important for individuals.

Expect no retroactivity. Whatever it is they may do, it may not take effect until January 1, 2018. Many times prior, mid-year tax legislation was made effective back to the first of that year, but tweets from House Speaker Ryan suggest that will not be the case this time. Many people postponed deals and, thus, receiving income to future years (in expectation of tax law changes and Obamacare repeal) and that advice seems to hold. In fact, the Treasury reports a drop in tax collections, probably due to people holding on. (Note: best thing on the planet, the ability to control one’s income.)

Repeal of estate and gift tax and Alternative Minimum Tax: Typically solely the province of the wealthy or affluent. Most Americans are not affected by federal estate taxes. Prince, the artist, was burned by estate taxes. Almost the same goes for AMT. This is tax relief for the affluent. Expats married to foreign nationals may be affected, however.

“Double standard deduction”: The plan is to somewhat double the standard deduction to $12,000 for a single filer. This would eliminate the $4,050 personal exemption, rolling it into the deduction. Itemizers would find their deductions limited. On the chopping block: mortgage interest, state and local tax, and charitable deductions. Okay, maybe not eliminated but rather capped in some yet unknown way. I told you it was a plan.

Expat taxpayers: Territorial tax reform? Nope, nada. Pie–in–the–sky efforts to get US taxpayers overseas to pay US tax only on income earned from US sources. This idea is a lead balloon, like the so-called “FATCA relief.” It is not on the Congressional radar.

Postcard filing: Aw come on, you really believe this? Perhaps a Rhode Island sized one, but the tax code and your tax rules won’t ever be so simple. They know it, and so should you.

 

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico. He can be reached at tax@orlandogotay.com or Facebook: GotayTaxLawyer.

 

Comments are closed

 photo RSMAtnWebAdRed13.jpg

Photo Gallery

Log in | Designed by Gabfire themes All original content on these pages is fingerprinted and certified by Digiprove