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- President Donald Trump and the GOP tax law have significantly changed tax requirements.
- Some tax changes could lead taxpayers to pay more taxes.
- Homeowners and the self-employed are among the biggest losers, says a TaxAudit report.
Many taxpayers will probably be surprised by the fact that they will file their tax returns in the spring and find out that Trump's tax cut does not help them. Instead, it will hurt.
The new tax rules offer a higher standard deduction and lower personal tax rates that will benefit many taxpayers. However, a number of changes may require some taxpayers to pay more taxes in the upcoming tax season, according to a review of the Defense Tax Reduction and Reduction Act, Audit TaxAudit .
Keep reading to see which taxpayers will lose tax benefits and will be harmed by the new tax law.
The owners
Homeowners are among the biggest losers because of the new tax law, according to TaxAudit. The new law reduces the amount of interest on mortgage debt by $ 1 million that can be deducted to $ 750,000 for loans contracted on or after December 15, 2017. The change mainly affects taxpayers in areas where housing prices are higher. high because they will not be able to deduct as much mortgage interest.
However, even homeowners who do not own such expensive homes may feel the negative effects of the new law if they have a line of credit on their net worth. If they borrowed the equity in their home for anything other than buying, building or upgrading a home, the interest on that loan is no longer deductible.
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itemizers
Several detailed tax deductions have been reduced or eliminated under the new tax law. For example, taxpayers detailing their tax returns may end up paying more in the spring, according to TaxAudit. See how dramatically the deductions have changed.
In particular, retailers who owe more than $ 10,000 in local and national taxes will lose money. Previously, listed taxpayers could deduct all national and local property taxes, as well as their income taxes or sales taxes. The new law limits the amount that can be deducted to $ 10,000. Thus, taxpayers from high taxing states who have been able to deduct all the state and local taxes they have paid in the past could be hard hit by this change.
Some detailed deductions disappear completely. Taxpayers who pay foreign property taxes can no longer deduct them. And employees will no longer be able to claim unreimbursed expenses – such as mileage, travel and meals – as detailed deductions.
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Parents and taxpayers with dependents
Prior to tax changes, taxpayers could claim an exemption for each dependent, ie a child or family member meeting certain criteria. As a general rule, if you were a parent and you have children, you can apply for an exemption for dependents if they are under 19 or 24 years old when they study, live with you and receive help from you more than half of the year. In the 2017 tax returns, the exemption was $ 4,050.
Between 2018 and 2025, the dependents and personal exemptions disappear, said Dave Du Val, TaxAudit's client advocate. However, the new tax law increases the child tax credit from $ 1,000 to $ 2,000 per eligible child under age 17. In addition, a new $ 500 dependent credit is available to dependents who are not eligible for the child tax credit, such as children over 15 years of age. 17, says Du Val.
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Taxpayers soon divorced
<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you get a divorce, you might want to hurry for that you do not become a tax loser as a result of the new tax law. Taxpayers divorced after December 31, 2018 will no longer be able to deduct support payments. So, if you want to keep this tax deduction, you will be prompted to finalize your divorce quickly. "Data-reactid =" 36 "> If you get a divorce, you might want to hurry it to not become a tax loser as a result of the new tax law. Taxpayers divorced after December 31, 2018 will no longer be able to deduct support payments. So, if you want to keep this tax deduction, you will be prompted to finalize your divorce quickly.
However, taxpayers receiving support payments will not have to claim it as income if their divorce is pronounced after December 31, 2018. This could, therefore, be a benefit to recipients of alimony.
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Independent taxpayers
Independent taxpayers are both winners and losers of the new tax law – depending on their income. The 2017 Tax and Employment Tax Act provides for a new deduction of 20% of qualifying business income for sole proprietorships and qualified transfer entities, Du Val said. . However, the deduction is limited to taxpayers whose income is greater than $ 157,500 ($ 315,000 for married taxpayers filing a joint return). And taxpayers whose income is greater than 207,500 USD (415,000 USD when they get married together) are not subject to a deduction if they perform specified activities in a service sector such as accounting, financial services, investment management, law, health and the performing arts.
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