If President Donald Trump is successful in his efforts to turn the tax code upside down, real estate agents must know how the changes affect their business and the clients they serve.
In the second of a three-part series, we will examine some of the proposals and the deductions and tax breaks that could be history.
According to a report by CNBC, a key question that Trump’s plan must address is whether doing away with tax breaks will make up for revenues lost from lowering tax rates. Treasury Secretary Steve Mnuchin has said that the plan will pay for itself as the economy grows.
“We are going to move this as fast as we can and when we have an agreement (with Congress), we will release the details.”
The report also indicates that Trumps plan reduces the number of personal income tax rates from seven to just three, 10 percent, 25 percent and 35 percent. It also would increase the standard deduction, which would essentially eliminate taxes on the first $24,000 of a couple’s income. The investment tax imposed under the Affordable Care Act, the estate tax and alternative minimum tax all would be history. National Economic Council Director Gary Cohn told CNBC changes will be varied.
“Homeownership, charitable giving and retirement savings will be protected, but other tax benefits will be eliminated.”
A large tax break under Trump’s plan applies to deferred foreign income. This will cost an estimated $587 billion over five years.
Moreover, Trump’s tax reform plan would eliminate the state and local tax deduction, taking away a popular federal tax deduction. Only the deductions for mortgage interest and charitable giving would remain untouched.
Real estate agents may find that scaling back these deductions could help simplify the tax filing process, but it also could raise the amount of your income that is open to taxation. The results of the deductions could vary from one tax filer to another without regard to current tax brackets.
Sen. Orrin G. Hatch, R-Utahm and Rep. Kevin Brady, R-Texas, both leaders of Congress’s tax-writing panels, has noted that they are open to the president’s plan to push forward with sharp cuts in the rates that businesses pay. Brady, who is the chairman of the House Ways and Means Committee, suggested that changes might be needed.
“I think the bolder the better in tax reform. I’m excited that the president is going for a very ambitious tax plan.”