Point View WealthPoints

Tax Reform and Tax Expenditures

0ef7cb9c1be3465a0228_d29ee6694ef2140fee1f_65d05b83ee8032557a1b_Toth__Claire.jpg
Claire Toth
9db79c1beddffece9ba1_00860f8cb008c510a000_43f4ce4950c844253765_TAP__300x250_-_Updated.jpg
0ef7cb9c1be3465a0228_d29ee6694ef2140fee1f_65d05b83ee8032557a1b_Toth__Claire.jpg

Very quietly, members of the President’s economic team have been meeting with key lawmakers to craft a tax reform plan. The stated goal is to pass legislation by year end.  That is an optimistic timetable, but the outlines of a concrete revision may emerge before then. Any Tax Code revision requires Congress to deal with tax expenditures. Tax expenditures are deductions, exclusions, and preferences that reward certain behaviors or certain taxpayers. Essentially, they are indirect government spending. Given the administration’s stated goal of reducing tax rates, expect at least some of these large tax expenditures to be re-examined:

  • Tax breaks for retirement accounts: Individuals get to deduct what they contribute to 401k plans (and the like). Employer contributions are excluded from income (but deductible to the employer). Earnings are tax-deferred until withdrawal.

  • Exclusion for employer-provided health insurance: Employers can deduct the cost of health insurance they provide employees, and that benefit is not taxed to the employee. This is by far the largest tax expenditure, estimated at $235.8 billion.

    Sign Up for E-News

  • Favorable tax rates for dividends and capital gains: This income is taxed at fifteen percent versus up to 35 percent for other income. At the very top income levels, the rate is 20 percent versus 39.6 percent.

  • Social Security benefits exclusion: Depending on your income level, 50 or 15 percent of Social Security benefits are tax fee.

  • State and local tax deduction: This includes deductions for both income taxes and property taxes.

  • Home mortgage interest deduction: Taxpayers can currently deduct mortgage interest on two personal residences, up to $1 million in total mortgages.  Further, the first $500,000 of gain on a principal residence escapes tax. Fun fact: total tax expenditures for home ownership exceed the entire budget of the Department of Housing and Urban Development.

  • Charitable contributions: Individuals can donate appreciated assets and deduct the fair market value, effectively escaping tax on the appreciation. Cash is also fully deductible.

  • Basis step-up at death: At death, assets get a new cost basis, equal to then-fair market value. Any pre-death appreciation escapes tax.

Note: Claire E. Toth, JD, MLT, CFP™, is Vice President at Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Ave., Summit. Visit us at  www.ptview.com.

For nearly 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals. Click here to contact David DietzeJohn PetridesClaire TothDonna St.Amant, and Elaine Phipps, or call 908-598-1717 to learn more about Point View Wealth Management, Inc. and how we can help you and your family meet your financial objectives. To sign up for our complementary commentaries and newsletters, e-mail us at firm@ptview.com.

CNBC has named Point View one of the Top 100 fee-only wealth managers in America.

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

Chatham

A Week at the Library of The Chathams Monday, February 19 – Sunday, February 25, 2018

PROGRAMS AND EVENTS

By Galina Natenzon

Friends of the Library are continuing their book collection in preparation for Annual Book Sale.  Kids are off from school on Monday for Presidents’ Day – bring them to the library!  We have plenty for them to do.  For adults, Professor Licklider’s second lecture on North Korea will take place on Tuesday.  The ...

Imagine a Chatham Toboggan Ride from the Top of Fairmount Avenue to Main Street

Did you know….
there was a time when Chatham kids could ice skate from downtown Chatham all the way to Florham Park? And that a toboggan ride could last from the top of Fairmount Avenue down to Main Street and beyond?

Those were the days!

This was back in the early to mid-1900s. The Passaic River meandered through grassy meadows and woods on the north side of Chatham. The marshy ...

#NoMore

February 20, 2018

To the Editor,

I told my daughter I needed to write about gun violence. Know what she told me? “Mom, be sure you’re not too polarizing. People won’t listen.” She’s right. At age eleven she’s figured out that we adults need to be reminded how to speak to one another in order to fix a problem. But I have hope and belief that we can fix that discourse in our ...

AtlantiCast

AtlantiCast: Episode 12

On this week’s episode of AtlantiCast, decade of excellence makes headlines, as Atlantic Health’s place on Fortune Magazine’s 100 Best Companies to Work For List leads off the newest episode of AtlantiCast. Also on this week’s show, check out the newest “hybrid” operating room at Morristown Medical Center and find out how Atlantic Health is helping local ...

AtlantiCast Medical Minute: Atlantic Orthopedic Institute’s Scoliosis and Spinal Deformity Center

On this episode of the AtlantiCast Medical Minute, we’ll take you inside the Atlantic Orthopedic Institute’s Scoliosis and Spinal Deformity Center, with the center’s director, Jason Lowenstein, MD.

Video Link: https://www.youtube.com/watch?v=1M7euCp86-c

Mindfulness and Meditation Courses Beginning March 2018

February 20, 2018

Mindfulness and Meditation Courses Beginning March 2018

-Space is limited as classes will be small-

MADISON, NJ – In celebration of the new spring season, come experience and enjoy Mindfulness and Meditation with Wendi L. Dumbroff, MA, LPC. Dumbroff is a Licensed Professional Counselor in private practice in Madison, New Jersey, where she specializes in individual, family, ...