With Congress on the verge of passing tax reform, how will the new rules affect you in your particular area?
As we rush headlong towards the Christmas break, and perhaps more importantly for many the end of the fiscal year, passing tax reform before Dec. 31 has never been a greater priority for Congress over the past few years.¬† But with five Republicans holding out from standing lock-step with Majority Leader Mitch McConnell’s coalition, negotiations over minute details could mean the difference between passage of a bill, or another Republican failure in 2017.
However it does appear that the Senate may finally have enough votes to pass tax reform which will be a blessing for some, and a curse for others dependent upon where you reside.¬† And thanks to a study put together by¬†Bloomberg and Baird Private Wealth Management, here is what the expected new tax schedules will look like for individuals and families across America.
Scenario 1 – Manhattan Millionaires: These Manhattan residents have a jumbo mortgage (at an assumed 4 percent interest rate) and take a $40,000 deduction on mortgage interest; pay property taxes of $96,250 and state income tax of $135,360; and make annual charitable contributions totaling $100,000.
Scenario 2 – Malibu Millionaires:¬† A married couple has a primary residence in Malibu, California, and a second home in Lake Tahoe. The property tax on the Malibu home is $15,860, and $4,896 on their second home; they deduct $40,000 total in mortgage interest for the two homes; and give $50,000 to charity.
Scenario 3 – Small Business Owner:¬† This married couple with a small manufacturing business in Pittsburgh, Pennsylvania, has $300,000 in pass-through business income. Their deductible mortgage interest adds up to $6,000; their property tax is $8,600; and they give 5 percent of their income to charity.
Scenario 4 – Suburban Family:¬† A married couple in a New York City suburb has estimated state income tax of $17,290; their annual mortgage interest deduction is $14,000; and they pay property tax of $13,750 — about the same amount they donate to charity.
Scenario 5 – Single Secretary In Manhattan:¬†This New York City renter pays estimated state income tax of $8,148 and gives about $6,500 to charity.
Scenario 6 – Married Family In Austin:¬† This young couple rents and has income of $100,000. They give $5,000 a year to charity.
Scenario 7 – Median Income Couple In Portland:¬† This Portland, Oregon, couple earns close to the median household income for the U.S. Their property tax bill is $1,688; their deductible mortgage interest is $3,000; and estimated state income tax is $4,744.
Scenario 8 – Median Income Family In Milwaukee:¬† This married couple rents and has an estimated 2017 state income tax bill of $2,104.
Perhaps one of the most important deductions will of course be the removal of the Obamacare mandate (tax) which was expected to increase again in 2018 for individuals who did not want, or could not afford, nationalized healthcare premiums.
With America’s economy being close to 70% consumer spending, it is only logical that to boost the economy the government needed to lower taxes and get more money into the pockets of Americans who have had to go deep into debt just to survive, much less have any extra cash for discretionary spending.¬† But as the population awaits for the corrupt legislature to finally get a bill onto the desk of President Trump, their hopes hinge on a number of rogue politicians who see themselves more as oligarchs than as representatives of the people.
Kenneth Schortgen Jr¬†is¬†a writer for¬†The Daily Economist,¬†Secretsofthefed.com,¬†Roguemoney.net, and¬†Viral Liberty, and hosts¬†the popular¬†youtube podcast¬†on Mondays, Wednesdays and Fridays.¬†Ken can also¬†be heard Wednesday afternoons giving an weekly economic report on the¬†Angel Clark radio show.