Home Mortgage Interest Deduction

Tax Cuts and Jobs Act: H.R. 1

Home Mortgage Interest Deduction

The proposed bill is reducing deductible interest debt limitation from $1 million to $500,000. In other words, only the interest on $500,000 of debt could be deducted. The $1 million debt limitation has been in effect for about 30 years without any inflation adjustment. Based on inflation over that period, the limitation should now be over $2 million. Furthermore, H.R. 1 would limit the interest deduction to only one home whereas it is currently allowed for the primary residence and one other, vacation home for instance.

The tax deductions for home ownership (mortgage interest and property taxes) are supposed to support home ownership which further stimulates the home building industry and the real estate sales industry. Some believe that the H.R. 1 proposal would have a negative financial impact on these industries.

There are many nuances to the home mortgage interest deduction. For instance, it is only available for home acquisition debt and a small amount of home equity debt. If you have any questions about it, please contact us.

Adoption Tax Benefits

Tax Cuts and Jobs Act: H.R. 1

Don’t believe everything you hear.

I heard a radio talk show host reviewing the proposed tax cuts bill today and he said that the Adoption Credit is going away. He was wrong. There is no such proposal in the bill that was released last week. The take away here is to not rely on media pundits as to what the bill provides or will provide in the future. Only tax professionals such as ourselves and have the expertise to understand the complexities of the tax code.

There are two adoption benefits currently in the tax code: 1) an adoption credit for individual taxpayers, and 2) an exclusion of adoption expenses paid by an employer from inclusion in the taxable income of the employee. It is the latter one, the exclusion, that is proposed to be repealed. The adoption credit remains in place – so far.

The adoption credit provides that individuals can claim a tax credit (reduction is tax) for qualified expenses incurred in adopting a child within certain limitations. The credit phases out for individuals with adjusted gross income above about $200,000 (adjusted every year). Any unused credit where the credit is more than the tax, can be carried forward for up to five years.

The exclusion provides that an employer can reimburse adoption expenses, up to a specified limit which changes every year, of an employee without having the amount included in the taxable income of the employee. The amount is also deductible by the employer on the business tax return.

There are many more caveats on the adoption credit and exclusion. Contact us if you need more information – don’t rely on what you hear from the media.

Affordable Care Act costs taxpayer

Another example of how the ACA is harming people.

A single 24-year old with a degree in IT is working for a local firm that provides health insurance. The firm has less than 50 employees so they are not required to file Form 1095-C to report the coverage for their employees. The IT worker has parents living a six hour drive away. The parents obtain marketplace insurance and place their so on the policy without informing him. The IT worker gets a notice from the IRS claiming that he owes $13,000 as repayment of the Premium Tax Credit that he did not receive, never knew he had duplicate insurance and now has to hire a professional to fix it.

A professional woman retires, buys health insurance through the marketplace and received a Premium Tax Credit. She withdraws money from her IRA account that puts her income over the limit to receive the PCT. She now owes $4,800 for the sin of taking her hard earned savings in retirement. She sits in my office crying because she doesn’t have the money to repay the government.

These are just two examples of how your government, in particular the Democrat Party, harms people financially.

If you have similar issues, we can help you but unfortunately, you will have to spend money to navigate the complexities of the ACA.