The House and Senate voted on a package of sweeping changes to the U.S. tax code, but its impact will vary greatly for individuals and small businesses depending on how they report their income.
So what can taxpayers do to prepare for what looks like an inevitable change?
Andrew Lattimer, a partner at BlumShapiro, said that Connecticut taxpayers, to the extent they can, should pay as much of their property tax assessment as they can before Dec. 31. That’s because it’s still deductible for 2017, and will be capped under the new legislation.
The new legislation will limit the deduction of state, local, and property taxes to $10,000.
“If you own a home the chances that your liability is higher than $10,000, “Lattimer said.
Lattimer also suggested that if you’re planning on giving money to a charitable organization next year and you have the money available now, it might be beneficial to make that contribution in 2017.
He said everyone’s situation is a little different so it’s hard to predict the impact, but those who have less complicated tax situations will likely see their tax rate decrease.
A person with a W-2, who doesn’t own a home and earns $50,000 a year will see a tax cut, Lattimer said.
But all of those tax cuts for individuals will still expire in 2025 and the system will revert back to the one that’s currently in place.
Sunsetting the individual tax changes, according to Republican lawmakers, was necessary to hit the budget targets and get it through the Senate on a simple majority vote.
The plan would also lower the corporate income tax rate to 21 percent.
U.S. Sen. Richard Blumenthal said Tuesday that there are “crumbs and sweeteners” in the tax package, but they are temporary.
“And they pale in comparison to the tremendous benefits that will go to corporations and the wealthiest,” Blumenthal said. “It narrows our tax base, shifting the burden in fact from corporations to individuals who don’t receive them. It makes tax codes more complicated, not less so. It grossly increases equality. And it steals $1.5 trillion from our children and from us insofar as it deprives our national defense as well as our infrastructure of resources that are needed.”
U.S. Rep. Jim Himes, who represents the southwest portion of Connecticut which will likely benefit from parts of the tax bill, said “restricting the state and local tax deduction (SALT) to $10,000 will cause hardship for many of our families and neighbors. The average SALT deduction in Fairfield county now is $33,400. That means that an average family will be taxed twice on an additional $23,400 of income each year. It’s really too much to ask for those who already pay a disproportionate amount of taxes while supporting their own families.”
He said working people in Connecticut already send more than their fair share to the nation’s capital than they get back.
“Working people in Connecticut already do more than their fair share to support our nation, sending more to Washington than we receive back,” the former Goldman Sachs executive said. “And, mostly, we do so willingly, knowing that it’s our duty as Americans to help the hungry child in Mississippi or the sick, single-mother in New Mexico. But, sticking us with the bill, time and time again, just to further enrich those who already have more than enough, crosses the line. I am disappointed in my Republican colleagues for ramming through this shortsighted and careless bill, and pledge to my constituents to keep fighting for sensible, fair tax policy on their behalf.”