Washington – Millions of households would no longer benefit from federal tax deductions for charity donations, mortgage interest payments and property tax under Republican tax plans being debated in the U.S. Congress, a think tank said on Thursday.
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The left-leaning Institute on Taxation and Economic Policy said that up to 29 million U.S. households now writing off donations, home loan interest and state and local property tax payments would no longer be able to do so under either of the two plans.
While all three deductions are maintained in some form in one or both of the rival Senate and House of Representatives bills, far fewer taxpayers could take advantage of them because of other proposed changes, said the Washington-based group.
“The House and Senate have voted to fundamentally transform those write-offs in ways that most people don’t understand,” said Carl Davis, research director of the institute.
Under the bills, the mortgage interest and charitable deductions would be “worthless for most people”, David said. “Less than one in 10 people is going to be able to write-off their donations to their churches or local nonprofits if this legislation is signed into law.”
President Donald Trump and congressional Republicans are racing to complete a sweeping tax code overhaul by the end of 2017. If they can, it would represent their first major legislative achievement since Trump took power in January.
Trump has promised to simplify the tax code, part of which involves ending tax breaks for special interests. That goal is encountering resistance from interests that would be hurt.
The Senate and the House have approved separate tax bills and are now trying to craft one unified bill to send to Trump for his signature.
As drafted, the two bills call for roughly doubling the “standard deduction,” a key part of the tax code, to $12,000 for individuals and $24,000 for married couples filing jointly.
The standard deduction is a fixed dollar amount, claimed by about two-thirds of taxpayers, that reduces taxable income.
Instead of claiming the standard deduction, about one-third of taxpayers, mostly high-earning Americans, itemize deductions. Doing that is worthwhile, in most cases, if the total of itemized deductions exceeds the standard deduction.
Both the Senate and House bills also curtail the deduction for state and local tax (SALT) payments, with the House preserving it for state and local property taxes up to $10,000.
Tax experts estimate that the combination of doubling the standard deduction and curtailing the SALT deduction would mean that far fewer Americans would itemize.
Since itemizing is the only way to claim the deductions for charity, mortgage interest and state and local tax payments, claims for those deductions are also expected to plummet, especially among middle-class Americans.
The institute estimated that the percentage of U.S. households writing off charitable donations, under the Republican plans, would fall to 8 percent from 26 percent. A similar decline would be seen in households claiming the mortgage interest deduction, it said.
“The mortgage interest deduction would be left in place for precisely the families who are least likely to need to the deduction to become homeowners. More than three-fourths of middle-income families claiming a mortgage interest deduction today would no longer receive that deduction,” it said.
“There are good reasons to consider reforming itemized deductions to improve their effectiveness or fairness. But the House and Senate’s approach to that task leave much to be desired,” the institute said
Wait till the Trumpf trailer park alts get wind of the tax cuts for the rich and huuuge corporations. Goes hand in hand w Toxic Trumpf’s attacks on FBI and Mueller.
If my yearly gross income is 110-130k and my property tax is in the 10k range charitable donations is 5-10k. Mortgage interest 6k. Can anyone elebrate if i am still covered under the new TAX plan?
“The left-leaning Institute on Taxation and Economic Policy said”
So, unbiased reporting about something the President is doing, right?
Laughable.
As poster #2 points out, the article is hardly clear. Especially for someone like me in a foreign country (our tax deduction system is different). But the closest I can make out from this is that a tax payer has a choice of claiming either the total deductions in list A, or the total deductions in list B, but not both. So all that happens is that if the government increases the eligible amount in list A, then some people will choose list A when previously they had chosen list B.
So I did a little more research. Fortune magazine gives what is (to me) a clearer picture of the proposed tax changes (one version). Those who already purchased a home and are paying interest are not affected. Those buying a *new* residence will have a smaller cap – the current cap (before tax changes) was a $1 million dollar mortgage, reduced to $500,000 mortgage. So logically, does that affect the lower-middle income or the upper income people more (and yes, location is important, so this is not even across the country, certain places $500,000 homes are a shack, but that is also true of the original $1million cap)? Clearly the increase in the “standard deduction” benefits who more – the lower income or the upper income (the latter would not use the standard deduction because they are more itemized deductions than standard deduction)?
So the article here (as compared to, say, the Fortune magazine article) sound like a “sky-is-falling” panic.
while it might hurt charities its a misnomer to say it’ll hurt taxpayers since if the standard is higher than their itemized and it’ll be BENEFICIAL to take standard. Obama said once that people don’t donate in order to deduct for tax purposes and my feeling is to agree. People give what they give for the most part without a tax deduction in mind. For the people that plan donations around their tax structure, if they’re that wealthy they probably have other ways around not taking SALT as itemized (like deducting through a business)
So the liberals in NY and California will have to pay more in taxes. Whaaa.Quit whinning already.