Potential Tax Effects of the Debt Limit Increase - Bryce Gharring, Temecula, Certified Tax Preparer and Realtor®
As we contemplate the changes this new agreement increasing the debt limit will have on us and our pocketbook, there is one thing to continue to keep in mind, the government will seemingly always be looking for ways to generate more revenue! The only meaningful way (at least meaningful in a collection sense) is for the taxing agencies to find new ways to impact our pocketbook. While some of what I am going to share can be classified as conjecture, the preponderance of evidence would seem to indicate that these changes may not be too far off in our future. Here then are a few of the ideas that have been floated out there for us to ponder:
- Cap the rate at which itemize deductions can reduce tax liability. Put in more common language, those in higher income brackets would receive less and get less benefit from traditioinal write-offs.
- Change the indexing of tax breaks. Example, phase out on educational benefits begins at $160,000, a lowering of that figure would mean taxpayers under the $160,000 of adjusted gross income would now be negatively impacted in allowing for those credits on their tax returns. There are many other types of credits that could be impacted this way as well.
- Consideration is being given to lowering the amount of home mortgage interest that can be deducted. This is one of the sacred cows of our tax structure and is a political hot potato for whomever recommends this change. While I don't see this happening in the near future, the fact that it is even being discussed lends credence to the gravity of our economic situation and to the fact that all options will be explored.
Finally, all the talk you hear of reviewing the tax code is real! I would expect that you will see a bi-partisan task force put together with the express purpose of considering a major overhaul. While we've heard these cries for change before, be assured, this one is less fluff and more substance than any of us have probably seen in our lifetime. Where this would end up is anybody's guess, however, remember this, much of our code is Congress' attempt to make the code as "equitable" as possible while satisfying constituents and special interests. It is literally impossible to satisfy everybody and there will be winners and losers.
The degree of change as a result of the debt limit increase and who falls into the "W" and "L" category will fuel the discussion and ultimately dictate what the changes will look like. So, bottom line, do I expect monumental change? In a word . . . . no! Having said that, however, be assured that you will definitely see changes, but as in most years with tax changes, they will be incremental, they will be political (hopefully to a lesser degree than previously) and they will be adjusted to meet the needs of the government and the American citizenry.
Brcyce Gharring has been a certified tax preparer for over 40 years, worked in the insurance industry for over 25 years as an agent, manager and executive, has been licensed and marketed securities for a major financial services firm for several years, and most recently combined that background to assist clients looking to buy or sell real estate as a Realtor® here in the Temecula Valley. Bryce assists home buyers and sellers in the entire Temecula Valley including Temecula, Murrieta, Menifee, Winchester, Wildomar and Lake Elsinore. He has earned the Certified Distressed Property Expert designation. He provides his clients with competence, compassion and understanding, as well as a dogged determination to help them meet thier financial and personal objectives.
Temecula California Realtor® | Temecula CA Tax Preparer | Temecula CA Homes
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