Federal lawmakers are hoping to pass a tax reform bill by the end of the 2017 year. The current proposals to overhaul the tax code involve changing tax rates as well as eliminating many of the current tax deductions.
A Virginia tax lawyer can provide assistance to taxpayers in understanding what reform of the tax code could mean for their ability to continue taking the deductions that they may currently be using in order to help to reduce their tax bills.
Deductions That Could Go Away with Tax Reform
While there are two different versions of tax reform plans that have been put forth by the United States House of Representatives and by the United States Senate, there are a few key deductions that could be eliminated or that could be changed under one or both plans. Some of the deductions that could disappear or change if tax reform passes include:
- Mortgage interest deductions for high value homes. The House Bill would allow for mortgage interest to be deducted only on new mortgages up to $500,000. This is a decrease from the current limit on mortgage interest deduction and is lower than the $1 million that taxpayers could continue to deduct under the Senate bill. The House plan would also remove the deduction for second homes and would also remove the deduction for home equity debt so taxpayers who currently deduct for mortgage interest paid on home equity loans and paid on home equity lines of credit would no longer be able to take these deductions if the House plan were to pass.
- State and local tax deductions: The House Bill would eliminate almost all of the deduction that currently exists for state and local taxes. Taxpayers would be able to continue deducting up to $10,000 in real estate taxes but all other state and local taxes would no longer be deductible. The Senate bill entirely eliminates the deductibility of state and local taxes.
- Student loan interest deductions: The House bill would eliminate the deductibility of student loan interest. The senate bill continues to allow eligible taxpayers to take this deduction.
- Deductions for medical expenses: While the Senate bill would continue to allow people with high medical expenditures to deduct those expenses as they can do under the current tax system, the House bill eliminates this deduction.
While both tax reform proposals eliminate or curtail some very popular deductions, the tax reform plans both increase the standard deduction. In the House plan, the new standard deduction of $12,200 for single filers would be roughly double the existing standard deduction, while the Senate plan would provide only a $12,000 standard deduction for single filers. Both plans also increase the child tax credit, but by different amounts and using different mechanisms.
Attorney Kevin Thorn, a Virginia tax lawyer, can provide you with assistance in determining if your deductions are likely to disappear and can help you to find ways to reduce the amount of taxes that you must pay under either the current system or after the passage of reforms. You should contact attorney Thorn for help with your tax issues as soon as possible.
