Inside the new tax plan and the possible effects on Capital Region residents
November 03, 2017 06:55 PM
ALBANY -- Here's a brief summary of what the tax plan calls for in its current form. It lowers the tax rates for corporations and increases the standard deduction for individuals. It reduces the number of tax brackets from seven to four. And it would adjust those tax brackets immediately, which means more income would get taxed at higher rates over time. In addition to eliminating personal exemptions, the plan would also take away itemized deductions for state and local taxes, and medical expenses. And it eliminates the deduction for interest on student loan debt and the adoption tax credit.
Patty Smith and her husband always wanted to be parents. She chose Friends in Adoption in Albany and became part of the organization as a result. She said the adoption tax credit was always under threat of elimination.
"We keep our eye on it very closely as an agency for our families, because our families really benefit from that tax credit," she added.
That threat could be a reality under the new tax plan. The credit subsidizes costs for private and international adoptions, sometimes in the tens of thousands of dollars.
"You can't put a price tag on adoption, you can't. But I think that tax credit in the end is very helpful for families," Smith said.
Those are not the only families who could get hit, according to Michael Cullen. He's an accountant who's been pouring over the numbers since the GOP plan came out. He said the middle class will be affected the most.
"It's almost like a bar bell effect. The people at the lower end are going to make out. The people at the higher end are going to make out," Cullen said.
But what is the middle class? The most recent definition are families with incomes between $48,000 to $144,000 a year. Cullen said the best example in the Capital Region is a family around $100,000 a year. He said they would be forced to take the standard deduction because state and local tax deductions are being eliminated. The deduction for real estate taxes would be capped at $10,000. And medical deductions would be gone, making the standard deduction more attractive.
"Their saving is going to be next to nothing or they're going to lose money on the federal level," Cullen added.
To add insult to injury, Cullen said that same family with children between the ages of 17 to 25 would lose even more deductions, approximately $4,000 a year per child. The higher end of the income ladder and heirs to massive wealth will see some benefit, according to Cullen's calculations.
"The fact that you can get out from paying any estate tax when you die and turning it over intact is pretty substantial for people at the higher end of things," Cullen said.
Updated: November 03, 2017 06:55 PM
Created: November 03, 2017 06:17 PM
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