If no new law is passed, what happens to the $750k mortgage interest deduction limit? And what about the SALT cap? Will those be impacted?
It’ll go back to $1 million for mortgage interest, and the SALT cap will be gone. But most people’s taxes will go up too.
Torin said:
It’ll go back to $1 million for mortgage interest, and the SALT cap will be gone. But most people’s taxes will go up too.
Just comparing before and after TCJA, SALT basically cancelled out the tax bracket changes. So if both expire, it won’t impact me much. Has the mortgage rule ever been adjusted for inflation? The housing prices here have doubled in the last 10 years.
Pretty much everything expires except the 21% corporate tax rate.
That might be an oversimplification, but this article covers it well.
@Kyrie
Also, the inflation adjustment for tax brackets (chained CPI) stays, so tax brackets will grow more slowly, which means higher effective tax rates.
@Kyrie
It’s better to think of corporate tax cuts as permanent (except for bonus depreciation). The 21% rate and repeal of the corporate AMT stay, but all the corporate tax increases (like 174, 163j limits, NOL limits, etc.) are also permanent.
@Kyrie
The article talks a lot about the standard deduction going back to its lower amount, but doesn’t mention if personal exemptions come back. Any idea?
Charlie said:
@Kyrie
The article talks a lot about the standard deduction going back to its lower amount, but doesn’t mention if personal exemptions come back. Any idea?
Yes, personal exemptions come back, but the Pease limitation on deductions will also return.
Charlie said:
@Kyrie
The article talks a lot about the standard deduction going back to its lower amount, but doesn’t mention if personal exemptions come back. Any idea?
Here’s a list from the Joint Committee on Taxation that shows what provisions sunset and which don’t: https://www.jct.gov/getattachment/2f1d880c-ca26-429d-9044-63ac084d07cd/x-67-17-5053.pdf
Charlie said:
@Kyrie
The article talks a lot about the standard deduction going back to its lower amount, but doesn’t mention if personal exemptions come back. Any idea?
The article isn’t comprehensive. Taxes will go up for those making over $450k if the TCJA isn’t extended. Exemptions will come back, but filing will feel a lot like it did pre-2017 unless new laws get passed.
@Kyrie
Everyone’s taxes are going up because the tax brackets revert too. 12% goes back to 15%, 22% goes back to 25%, and so on.
Emlyn said:
@Kyrie
Everyone’s taxes are going up because the tax brackets revert too. 12% goes back to 15%, 22% goes back to 25%, and so on.
Yep, that’s right. The article focuses more on high earners above $450k, but it affects everyone. Lower tax rates and the larger standard deduction will disappear.
Politically, no party wants to raise taxes on middle-income earners. Both sides will likely have a public debate on things like the SALT cap, mortgage interest deductions, capital gains, and corporate taxes as 2025 approaches.
@Jessie
Worst case scenario is a Harris presidency with a Republican Congress. They’ll let the middle and lower class suffer if it means blaming the president.
Jody said:
@Jessie
Worst case scenario is a Harris presidency with a Republican Congress. They’ll let the middle and lower class suffer if it means blaming the president.
Don’t forget about 199A (the pass-through deduction). That was huge for Trump’s real estate buddies, and real estate is a powerful lobby.
@Kiran
True, but some might be willing to take the hit if they can blame the Democrats and secure long-term power.
@Jessie
If Dems keep the presidency but Republicans control Congress, there’s a good chance nothing gets passed. It’ll depend on who’s willing to negotiate.
1099 workers will lose their 20% QBI deduction, which is a big deal. On the other hand, W2 employees who work from home could take the home office deduction again, which went away under TCJA.
Payne said:
1099 workers will lose their 20% QBI deduction, which is a big deal. On the other hand, W2 employees who work from home could take the home office deduction again, which went away under TCJA.
I kind of hope QBI goes away. It’s a pain to calculate, and a lot of service-based workers end up losing it because they make too much. Had a client whose wife got a promotion, and they ended up paying more in taxes because his QBI deduction vanished. Tough to explain that one.
Dems want things like the expanded ACA subsidies and the monthly child tax credit to stick around. Maybe they’ll compromise on other tax provisions, like with the Bush and Obama extensions. But if Republicans take control of the Senate, House, and presidency, expect a lot of changes.