bdmetronews Desk ॥ It will take months or years to tell if the tax cuts President Trump signed at the end of 2017 will boost economic growth or help create jobs, as intended. But little by little, we’re getting more evidence of what is likely to change under the new tax regime.
Some of the changes will be big. Congress’s Joint Committee on Taxation has published new estimates of the ways people will file their taxes for 2018, the first year most of the new tax provisions will be in effect. Here are 3 big changes:
Far fewer people deducting state and local taxes. One of the most disruptive changes to the tax code is a new limit of $10,000 on the deductibility of state and local taxes, which used to be subject to no limit. The JCT estimates the number of people claiming the so-called SALT deduction will drop from 42.3 million for 2017 to 16.6 million for 2018—a 61% decline. For many filers, the new threshold for the SALT deduction means there will be no point itemizing, because their tax bill will end up lower using the standard deduction, which nearly doubled under the new law to $12,000 for individuals. About 7% of filers will end up with a higher tax bill under the new law, in large part because they have a large state and local tax bill and will lose more through the new SALT limit than other provisions of the bill will make up for.
Far fewer people deducting mortgage interest. The JCT predicts the number of taxpayers claiming a mortgage interest deduction will fall from 32.3 million for 2017 to 13.8 million for 2018—a 57% decline. The Trump tax cuts made only one significant change regarding mortgage interest, by lowering the maximum amount of deductible mortgage debt on a new loan from $1 million to $750,000. That affects very few home owners. But the new limit on the SALT deduction, along with the bigger standard deduction, will simply limit the benefits of itemizing for millions of taxpayers.
A windfall for businesses. Big businesses known as C corporations will enjoy a 40% reduction in the corporate tax rate, from 35% to 21%. Yahoo Finance and many other news outlets have reported extensively on what big companies are likely to do with the tax savings, with many buying back shares or raising dividends. Some companies, such as Apple, have committed to new investments. And dozens of companies have given employees one-time bonuses.