I’m surrounded by conversations about the new tax bill. In between “Rudolph the Red-Nosed Reindeer” and a remix of Leonard Cohen’s “Halleluja,” my day is sprinkled with tax bill news.
Colleagues, clients, friends and even strangers talk to me about it. It’s all over radio, TV and social media. I’d provide a link but, honestly, I don’t need to. I can almost guarantee that, within the next 10 minutes, you will hear or read something about the new tax bill.
What my colleagues and collaborative advisors (CPAs, tax attorneys) are saying:
Do your charitable giving this year while you can still itemize your tax deductions. (Note: You can still itemize your deductions and charitable contributions are still deductible, but the standard deduction is doubling, therefore, it’s less likely you’ll have enough deductions (meaning more than the standard deduction) to itemize them.)
Don’t bother paying your January 2018 estimated state tax payment this year, thinking you can still deduct it an itemized deduction (April’s, July’s and October’s are “safe,” I’m told). (Note: The new tax bill either limits or does away with the state and local tax deduction.)
Will people complain about my fee? This is because miscellaneous itemized deductions are going away, which include tax preparation fees and investment advisory/financial planning fees. These also include un-reimbursed employee expenses (including uniforms, union dues, and employment-related travel, for example). Possibly, with lower corporate taxes, the company can reimburse these expenses themselves.
What my friends are saying:
Our close friends have six children. I know another family who has 10. With the personal exemptions going away ($4000 per person), even doubling the standard deduction can’t offset the loss of the personal exemptions. I believe the Child Tax Credit being increased is meant to help in this regard. Remember, a credit can be more valuable because it’s a dollar offset against your tax bill. Deductions are like getting something on sale, a credit is like a coupon!
Single or married people who don’t itemize will potentially see a benefit because their standard deduction is increasing by more than their personal exemption(s). This includes people who are low income.
What real people are saying (or thinking):
I’m worried about how this will affect me and my family.
I don’t really understand taxes. What will this mean to me, really?
Will my Social Security, Medicare or Medicaid benefits get cut?
I feel like my life is in someone else’s control.
This isn’t fair!
It’s the same old, same old: The Rich Get Richer.
I’m not saying anyone is wrong for thinking or saying these things.
What I’m saying:
- A tax bill does not rule my life, nor does it rule yours. Yes, we have to follow the law, but that doesn’t mean our ability to make decisions goes away.
- Get informed, get professional advice, and move on with your life!
- If you want to give to charity, give to charity. If you can reduce your tax bill in the process that’s a bonus, but it’s not the driving reason for generosity. If you really want to focus on how you can reduce your income or estate taxes by giving to charity, you’re probably in a higher tax bracket which means you probably have a higher level of income and/or wealth and that means you can probably make a large donation and benefit from itemizing your charitable deductions.
To the thoughts listed above, I offer the following responses:
I’m worried/scared how this will affect me and my family.
Understandable. Allow yourself just five minutes per day to worry and then move on. Worry is addictive, be careful.
I don’t understand taxes. What will this mean to me, really?
Sit down with a professional CPA. Buy some time with someone who knows what they’re talking about, who can look at your unique situation and explain it to you clearly. I know some of the best CPAs, smart and funny; let me know if you need a referral.
Will my Social Security, Medicare or Medicaid benefits get cut?
Probably not today or tomorrow but, potentially, yes. Start to look at your cash flow (income and expenses) and take control over those areas you can control, get creative finding solutions to your needs. This will require your time, energy and attention but it’s a good investment of all three.
I feel like my life is in someone else’s control.
Don’t fall for it. All civilizations have required some form of taxes. All citizens complain about taxes. There are many ways to get involved, make changes, or make peace with yourself. Determine what would make you feel more in control of at least your finances.
This isn’t fair!
That may be true. Fair is very subjective.
It’s the same old, same old: The rich get richer.
Probably. If you’re “rich,” hooray for you! If you’re not “rich,” you can still have a good life.
If you want to think of something besides the new tax bill, head on over to my Facebook page and watch a video of baby goats.
Be well,
Amy Jo
LIFE: Live Inspired, Financially Empowered 