New Tax Law’s Winners & Losers

Performance Property Real Estate Question

Q: Gerald, who are the big winners under the new tax law that just passed? Sandra, NY, NY

A: Under the new tax law, taxable income is likely to increase for most people but the rate percentages are lower which may offset tax increases. The best way to see how the new law will affect you is to scrutinize your own taxes before and after the new law to see how your tax burden changes. Here are 5 winners and 5 losers under the new tax law:

New Tax Law Winners

  • Corporations-tax rates lowered from 35% to 21%
  • Corporations-AMT (alternative minimum tax) repealed
  • Pass through entities-taxes under the new law are lowered by a 20% deduction for qualified business income
  • Renters. Standard deduction increases under the new allows renters to write off more than ever before ($24K for married renters!)
  • People who make a lot of charitable contributions–deductions increased to 60% of AGI (adjusted gross income) from 50%

New Tax Law Losers

  • Borrowers and lenders of Home Equity Lines which are no longer deductible
  • Married people who buy homes with mortgage over $750K or single people who buy homes with mortgage over $375K–existing mortgages of that size or larger are grandfathered in
  • People with older kids or other dependents. The child tax credit did double from $1K to $2K under the new tax law but it doesn’t apply to kids over 16 or to elderly dependents because the new law eliminates personal exemptions
  • Business with NOLs which under the new tax law can no longer be used against taxes paid in prior years–NOLs can only be used against future income
  • People who own property in high property tax areas especially in good school districts because the new law limits state and local tax deductions to a maximum of $10,000

Thanks for your question, Sandra.

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