Other deductions will be eliminated entirely, including but not limited to:
- Home office expense deductions
- Unreimbursed employee expense deductions, such as those for teacher’s out-of-pocket classroom expenses
- State and local income tax or sales tax deductions for individuals, which would be devastating for taxpayers in high tax states, particularly California
- Entertainment expense deduction (expenses incurred when taking clients and others to business meetings out of the office), the elimination of which will significantly affect small business owners, restaurant and bar owners, to name a few, but will make little difference to the extremely rich
- Student loan interest deduction, which was eliminated in the House version of the bill, but retained in the Senate version
- Alimony deduction, which could greatly increase the cost of getting divorced
- And our favorite – the deduction for tax preparation expenses, which may encourage many people to do their own taxes (and make mistakes, usually to their detriment)
Other provisions that benefit the wealthy
Here are just a few other provisions that benefit the wealthy at the expense of lower-income Americans:
- Increased deductions for automation in manufacturing. Increased deductions for manufacturing company infrastructure are expected to encourage companies to replace blue-collar workers with automated production facilities (robots and artificial intelligence). No provisions have been made for the re-training of affected workers.
- New tax deduction for private school tuition / expansion of 529 plans. Education deductions that are part of the tax bill include a new tax deduction for private school tuition (including tuition to private religious schools). The bill also expands tax-exempt 529 college savings plans, to allow these plans to be used for K-12 private school tuition and homeschooling.
- Elimination of estate taxes for most wealthy individuals and couples. The federal estate tax exemption is currently $5.49 million per individual (just under $11 million for a married couple), and affects a small minority of very wealthy individuals. These taxes can be minimized or eliminated entirely through various estate planning techniques – for those who pay, the funds serve as a major source of government revenue. The new tax bill doubles the exemption to $11 million per person, or $22 million per couple, effectively eliminating estate taxes for half of the estates that would otherwise need to pay it, and reducing estate taxes by approximately $4.4 million for those still subject to it. Note that the House bill eliminates the estate tax entirely over time.
What you can do
There are a number of things that you can do before December 31st to minimize the impact of the impending tax law changes. Contact the tax law firm of Moskowitz, LLP to learn more.