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Dec 28 2017 38970 1
8 tax breaks in the new GOP tax bill
Tax experts are combing through the legislation to get a handle on how its new tax brackets and treatments of everything from bonds to charitable donations will impact their clients. Meanwhile, Republican leaders say the tax bill will put more money in the pockets of average Americans.
The bill will lower taxes for the middle-fifth of taxpayers by $800 per year on average, but people in the top 1 percent of the income distribution will enjoy an average cut of $55,000, the Institute on Taxation and Economic Policy estimates.
As in any major tax reform, meanwhile, some filers will receive new tax breaks thanks to lobbyists and politicians who had an eye out for specific groups. Other tax breaks were maintained in the final draft after earlier versions threatened to scrap them, such as the $7,500 tax credit for buyers of new electric cars.
America's citrus farmers are getting a helping hand in the tax bill. Because of the citrus greening disease -- a deadly disease that kills off citrus plants -- and Hurricane Irma, the bill provides tax incentives to farmers who want to replant damaged trees.
Private aircraft owners are in luck with a break that will except their payments for management services from excise taxes. These services include everything from storing and fueling the plane to paying for weather forecasting. The provision provoked fury among some critics, who pointed to it as one way the bill benefits the rich over the middle class. Yet the tax break is designed to help private charter flight operators sidestep a tax aimed at commercial airlines, according to Business Insider.
Brewers, vintners and distillers
The people who make the hard stuff are getting breaks in the tax bill. These creators of alcoholic drinks are the beneficiaries of the Craft Beverage Modernization and Tax Reform Act, which is part of the bill.
The Distilled Spirits Council said in a statement that it is the first reduction in the federal excise tax on distilled spirits producers since the Civil War. The Wine Institute, for its part, said it was the first reduction in wine excise taxes in more than 80 years. It added that it had been working on convincing lawmakers to support the tax break since 2015.
Engineers and architects
These two groups of professionals scored a break when lawmakers exempted them from the definition of "service businesses." Why does that matter? Service businesses can't receive the full 20 percent deduction for pass-through revenue, a lucrative tax break for people who own partnerships, S Corporations or sole proprietorship's.
Students at private schools
Section 529 plans were developed to help parents save for their children's college education, but the tax code is expanding the plan to allow them to be used for kindergarten through 12th grade tuition. The expansion is geared for the 10 percent of families who send their children to private schools.
People with heavy medical expenses
Taxpayers who have had large out-of-pocket medical expenses may be able to get a tax break. The bill lowers the threshold for deducting those expenses to 7.5 percent of adjusted gross income, compared with 10 percent previously. Adjusted gross income reflects income after deductions.
Ex-spouses who receive alimony
The tax bill will make a big difference to married couples who are calling it quits. The Republican plan is getting rid of a 75-year-old tax deduction for alimony payments, although it won't impact couples who divorce or separate before 2019.The longstanding tax treatment of alimony had allowed the spouse paying it to deduct it, while the spouse who received the money had to pay taxes on it.
Uber drivers and gig-economy workers
Gig economy workers like Uber drivers and freelancers will benefit under the tax plan's treatment of pass-through income. The tax bill provides a 20 percent deduction to pass-through businesses, many of which are small businesses like landscapers and Uber drivers.
Under previous law, that income was taxed at the personal income rate. But with Republicans lowering the corporate tax rate to 21 percent, that left a big gap between what big businesses would pay versus independent contractors or small business, given the top individual tax bracket will be 37 percent.
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