Fed tax deductions?

[wanaberetiree]

Four big items may changed if our politicians decide so...

- mortgage loan interests
- donations
- state tax credits
- health care tax

Just looking for this forum opinion on this topic.
What would you say if those deductions were gone next year?

 

[Jack_Pine]

I would be surprised if they do anything big in a mid-term election year.

 

[RE2Boys]

I don't know of any state tax credits on a federal form. Credits and deductions are completely different.

That said, can the current Congress agree on anything??

 

[gauss]

I personally would say that it would not effect me directly. Now that I am FIRED our state income tax is low enough not too push us over the standard deduction threshold.

Do many of the other FIRED folks still come out ahead itemizing deductions vs. taking the Standard Deduction?

For reference, we are married filing jointly.

-gauss

 

[M Paquette]

Four big items may changed if our politicians decide so... - mortgage loan interests - donations - state tax credits - health care tax Just looking for this forum opinion on this topic. What would you say if those deductions were gone next year?

Of those four items, I would expect than none of them will change before 2017-2018. The electoral cycles tend to inhibit major changes outside the first year of a presidential term.

In 2014 we have a mid-term election coming up, for all the House of Representatives seats. They'll be too busy prepping for primaries and then the general election to risk upsetting any voters with new issues. In 2015 we seat a new Congress from the November 2014 elections. They'll be jockeying for the best committee appointments and settling in (never mind that 90% were present for the previous session). Before the summer break is over and they could get started doing anything serious, Presidential Primary season will be moving into high gear. (Yeah. Mid-2015 for the 2016 elections. Oh frabjous joy...) Doing anything other than shouting at each other is right out for 2016.

So, I wouldn't worry about it too much. More likely that we'll get hit by an asteroid than anything will happen to these goodies in the next several years.

 

[samclem]

If/when the time to reign in deductions does come (and it probably won't be soon), I don't think politicians will seek to eliminate individual types of popular deductions (such as those in the OP). It just makes too many people mad. Instead, itemized deductions will be capped at some amount (For reference, in the last election, one popular candidate suggested they be capped at $17K. The proposal also included a limit on the personal exemption and a cap on the amount of health insurance that could be received tax free. On the flip side--all income tax rates would have been cut by 20%. More here) . According to the article at the link, just 30% of taxpayers itemized in 2011, and only about 10% of taxpayers had deductions above $25K. I'd bet any cap would start out even higher, just to allow it to be put into place. To assure it affects more and more people over time it could be lowered later or (more likely) just not adjusted for inflation.

 

[Mulligan]

I personally would say that it would not effect me directly. Now that I am FIRED our state income tax is low enough not too push us over the standard deduction threshold. Do many of the other FIRED folks still come out ahead itemizing deductions vs. taking the Standard Deduction? For reference, we are married filing jointly. -gauss

I'm retired, single, with mortgage and pension. Itemizing roughly doubles my standard deduction, so I definitely will continue to itemize.

 

[scrabbler1]

Four big items may changed if our politicians decide so...

- mortgage loan interests
- donations
- state tax credits
- health care tax

Just looking for this forum opinion on this topic.
What would you say if those deductions were gone next year?

Can I assume you mean the following in your list:

Mortgage loan interests - the deduction for home mortgage interest which can also include the portion of a co-op's interest on its underlying mortgage on the buildings and land it collectively owns.

State tax credits - You are referring to the deduction for state and local taxes such as income, property, and sales taxes?

Health care tax - Are you referring to the exclusion from income tax for the employer-paid portion of group health insurance premiums? Or are you referring to the deductibility of after-tax medical expenses which exceed a percentage of AGI?

Since I ERed in late 2008, I have itemized my deductions in some years, taken the standard deduction in other years. But with the ACA's federal subsidy based on one's (M)AGI, a previous idea of "bunching" my deductions is now not looking as good because of an offsetting effect on the MAGI.

I agree that any big tax reform measures would not start until 2017. The 1986 Tax Reform Act actually began in 1985, the first year of Reagan's second term. And that was when there was a good spirit of bipartisan co-operation between the two parties in divided government, especially the leaders of key House and Senate committees in charge of writing the legislation. Back then we had Bob Packwood, Dick Gephardt, and Bill Bradley all working together to make a deal. I don't see Paul Ryan and Patty Murray making a deal of that magnitude.

 

[travelover]

Long term, I see spending cuts and increased taxes. The most expedient way to increase taxes is to get rid of deductions "in the spirit of fairness", as opposed to raising the tax rates, which would be "class warfare".

 

[Payin-the-Toll]

Haven't had a mortgage since 1992, so it wouldn't affect me, but there's no way in he!! they're going to cancel the deduction for mortgage interest, not after what housing's been through the last few years. They might cap it at some large amount, but that's about it.