(February 2018 Update)
Effects of the New Tax Law, Now and Later
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Taxes! It’s a subject with enough excitement to make anyone’s eyes glaze over, right? Not today! Welcome to (show name.) I’m (host name) and we are going to look at the newest tax laws today and find out how they might affect you right off the bat and down the road. A lot of people find it hard to cut through all the political stuff and it seems like different news outlets are saying different things. Will the new tax laws hurt the poor and line the pockets of the rich, protect businesses or hurt them and how will these new rules affect you and I. Will we be paying more or less? Are we all getting money back this year? There’s a lot of misinformation floating around and today is the day we fix that and take a look at what the new tax rules will mean to your bottom line. So, thank you for being here today. I really hope the information I have for you today will help you smoothly make the transition to the new tax system.
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For decades, we’ve had the same tax rules so there really hasn’t been any guesswork. We all know what’s up, right? Well, the new tax law signed by President Trump changed all that. We’re talking sweeping change and it’s got a lot of us wondering how it will affect is. That tax return money you may count on every year – will it be coming your way? Are the brackets changing and will you fall into a more expensive bracket? The questions seem to be coming from all segments of our economic society. The rich aren’t sure how their tax situation just changed. The poor aren’t sure either…and the middle class – they’re just hoping they don’t get a big surprise tax bill in the mail. Even the experts…financial planners and officials with the IRS…they’re all in a hurry to understand exactly what the Tax Cuts and Jobs Act actually does. Let me tell you, if they’re scrambling to figure all this out – what about the rest of us? Here’s what we know:
Most Americans will get a tax cut because of the new law – but that might be short lived. For technical reasons, the law’s provisions covering individuals and families will expire in 2025. At that time, it will have to be extended by Congress and we all know that’s never a sure thing. The part of the law that covers businesses – that’s more permanent. If you’re thinking that doesn’t seem fair, hear this…the bipartisan Joint Committee on Taxation says that while most Americans will pay less in taxes initially, if those cuts aren’t extended come 2025, more than half of taxpayers will be paying more by 2027. So for many of us, it may be beneficial financially to look down the road a bit and see exactly what may be in store. That plays into retirement for many of us.
While this may not be great for your bottom line in the years to come, it also might not be so great for America’s bottom line. That same committee says that over the next ten years, the new law will pack another $1.4-trillion-dollars onto our national debt. That number could go much higher if the individual tax cuts are not extended. Some experts say with businesses paying lower taxes, more money will go back into the US economy and it could be good for everyone in the long run. The problem is, our crystal ball is in the shop and we can’t prove that. Meanwhile, there’s a lot of debate that the long term impact of the new tax laws on the US economy may not be all sunshine and roses. But…like it or not, the new law will affect just about everyone to one degree or another. Since we are all in the same boat floating along together, we may as well look ahead together and figure out what’s coming. So, let’s take a look at how the new tax laws will affect consumers, we’ll touch on businesses too – but mostly we’ll be talking about how the new tax laws affect you and me.
ENGAGE: TELL AN EXEMPLARY STORY TO ILLUSTRATE THE POINT. (BEST IF ADVISOR ORIGINATED, NOT SCRIPTED. USE PERSONAL EXPERIENCE TO TELL A STORY FROM A CASE ABOUT THE TOPIC OF THE WHITE PAPER.)
Dave is 51 and he says he’s not sure what to think of all the new tax rules. He sits down with his online tax preparing software and figures out how much he and his wife owe every year. Sometimes, they get back thousands because of their major mortgage interest deduction and sometimes they end up paying a little. Dave says he usually knows way ahead of time how it’s going to go and he can start saving for his tax bill if needed. He’s heard that most people will get a tax break this time, but he says he really has no idea how it will go. He’s heard there is a cap on mortgage interest now and wonders if that will mean the end of his big deduction. A deduction that he thinks is the only reason he’s been able to afford to stay in his California home.
So here’s the deal on Dave. He may not be wrong because here’s what we know about the new law:
It will lower income tax rates for most households, but that’s not the only thing that will affect your bottom line. The new tax law will also increase the standard deduction, but will eliminate personal exemptions. It’ll put a cap on state and local tax deductions – which could have a big impact on state’s with high income tax. It will put new limits on the amount of mortgage interest that can be deducted. Here’s a controversial one…it will eliminate the mandate to buy health insurance. And lastly, it will create a 20-percent deduction for pass-through business. What’s a pass-through business? It’s a business that does not pay corporate income tax. Most often pass-throughs are sole proprietorships, S-corporations, which pass deductions, income and losses to their shareholders. Basically, about 95% of businesses in the U.S. are categorized as pass-throughs.
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I know there’s a lot to all of this. As we cover something here that really pertains to you, you might want more details or you might just want to get that information again so it really sinks in. If you’re like me, sometimes reading something helps me really get it. I am not ashamed to say I will often read the same section more than once because I really want to have a handle on it. All the information I am giving to you today…every single thing…is available in our complimentary white paper. We make that available to you because we think this information is so important that we want you to have access to it and be able to refer back to it. It’s particularly important with these new tax laws – because we know you can’t remember every single word, so now you can have it in your hand. This white paper has detailed tables and very clearly lays things out for you. I am glad I already have one and I am happy to provide one to you…at no cost. Give us a call at (number) to get your white paper on the effects of the new tax law and we’ll get it right out to you.
Coming up, we’ll really jump into these new tax laws and get a look at the new individual tax rates. We’ll compare the old rates to the new rates and you will be able to see where you will land in this new tax system. Let’s just hope it’s in a good spot! If you’re trying to figure out our tax situation this time around, we’re here to help you. Surprises are great stick around as what’s next is how to prevent overpaying on your taxes with the new tax laws.
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