Update 12/22: President Donald Trump signed the reconciled Senate-House tax bill on Friday morning, meeting his goal of a Christmas resolution. The New York Times is reporting that the president signed the bill despite congressional discussions that delaying the signing until early January could potentially avoid budgetary cuts to social services that would automatically triggered by the increased deficit.
It’s been one week since we broke down how the Senate’s tax plan was set to impact Westchester and asked you to chime in. In that week, Republicans in both the House and Senate have been rushing to reconcile the differences in their two bills, and we’ve received nearly 500 responses to our brief five-question survey.
What You Need to Know About the New Tax Bill
NBC and other news organizations are reporting that the revised bill some of the largest changes in the Senate’s proposal have been … changed.
The corporate tax rate would be dropped to 21 percent instead of 20, and the highest tax rate for individuals would lowered even further to 37 percent instead of just 39.6. (Effective next year.)
The bill will also repeal the Affordable Care Act’s individual mandate, something present in the House bill but unable to be included in the Senate’s version due to restrictions on how much a Senate bill could add to the federal deficit. The Congressional Budget Office has determined this would lead to 13 million fewer people with health insurance, and raised premiums for ACA users.
State and local tax (SALT) deductions would be reinstated, but capped at a maximum of $10,000. Tax payers could also chose whether to deduct their property or income taxes.
Mortgage interest deductions would be allowed on loans up to $750,000, down 25 percent from the current $1 million.
For entrepreneurs, deductions on pass-through income (the way most small businesses operate, as opposed to corporations) would be brought back, but set at 20% on the first $315,000 of income.
The standard deduction would remain at double the current amount: $12,000 for individuals and $24,000 for families. The child tax credit would be doubled to $2,000 and would be refundable up to $1,400
What This Means for Westchester
A lot of these reintroductions come with a sigh of relief. Let’s take a look at our poll of Westchester Magazine readers from this past week:
91 percent of respondents said they claim more than that base $12,000 annually, while 92 percent itemize their deductions for a greater return.
What’s more, at least 87 percent of users said they already pay more than $10,000 in SALT deductions. While their reinstatement is definitely a welcome relief to anyone who won’t be taking the standard deduction, it is still possible for residents with a mortgage to end up with fewer deductions than they had previously.
Still of concern is the amount this bill will add to the federal deficit. The ramifications for small business owners and the repeal of the individual mandate requiring health insurance are likely to impact the economy, especially the health care industry. In our survey, more than two thirds of respondents said they do currently rely on Medicare and other social services. As noted in our previous article, should the deficit grow too large, it will automatically trigger budgetary cuts to these services.
We’ll keep you posted on significant changes and updates as the bill makes its way through the Congressional process.