Congress is considering several changes to tax laws which could have an impact you in coming years. Here are a few of them:
Taxpayers who currently itemize deductions on Schedule A of their income tax return are currently limited to a $10,000 overall deduction for state and local taxes (SALT) during the year. The House Budget Com.'s list has five options to handle this break, some of which are revenue-saving measures, while others would hike the cost of any tax bill:
(1) Entirely repeal the SALT deduction;
(2) Double the $10,000 cap to $20,000 for married taxpayers filing a joint return;
(3) Increase the cap to $30,000 for joint-return filers and to $15,000 for all other filers;
(4) Let the $10,000 cap expire at year-end, but allow filers to deduct only property taxes, not state and local income or sales taxes; and
(5) Nix the SALT deduction for businesses.
The proposed changes for education tax credits include scrapping the Lifetime Learning Credit, the American Opportunity Tax Credit, and the up-to-$2,500 above-the-line deduction for interest paid on student loans. Additionally, there is a proposal to tax scholarship and fellowship grants.
Currently, a homeowner can deduct interest on any mortgage that is $750,000 or less. Congress is proposing to lower that cap to $500,000. If nothing is done on the proposed bill, the cap will revert to the pre-2018 $1,000,000 cap after 2025. If Congress does lower the cap, then the lower cap should only apply to mortgage loans taken out after the new law takes effect.
Currently, interest earned on state-issued municipal bonds is income-tax free for the most part. Proposals have been made to eliminate this exemption. This proposal is a revenue play and is probably a non-starter because of the significant effect it would have on state and local governments to raise funds for building, school and transportation projects.
As things develop on these and other tax issues that are relevant to you we will update this blog article.
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