After waiting several weeks, er, make that months, and enduring endless tweets in August, we seem to have a “drum roll” tax plan.
I said plan, because that’s what it is. A plan can’t become law. There is no bill, no “language” as one refers to what actually may someday become a law. Still, there are some guideposts to look at.
You may wonder why isn’t there a bill yet. The answer is simple. The majority is seeking conceptual “yeses” on a general idea, getting “commits” for it, and then reducing the idea to actual legislative language. Okay ... they run the farm, not I.
Let me walk you through some of the highlights I think important for individuals.
Expect no retroactivity. Whatever it is they may do, it may not take effect until January 1 2018. Many times prior, mid-year tax legislation was made effective back to the 1st of that year, but tweets from House Speaker Ryan suggest it won’t be this time. Many people postponed deals and receiving income to future years (in expectation of tax law changes and Obamacare repeal) and that advice seems to hold. In fact, the Treasury reports a drop in tax collections, probably due to people holding on. (Note: best thing in the planet, the ability to control one’s income).
Repeal of estate and gift and Alternative Minimum Tax: Typically solely the province of the wealthy or fairly affluent. Most Americans are just not affected by federal estate taxes. Prince, the artist, got burned by estate taxes. Almost the same goes for AMT. Most people are not affected. This is tax relief for the well off. Expats married to foreign nationals may be affected, however.
“Double standard deduction”: The plan is to somewhat double the standard deduction to US$12,000 for a single filer. They would eliminate the US$4,050 personal exemption, rolling it into the deduction. Itemizers would find their deductions limited. On the chopping block: mortgage interest, state and local tax and charitable deductions. Ok, maybe not eliminated but rather capped in some yet unknown way. Told you it was a plan.
Expat taxpayers: Territorial tax reform? Nope, nada. Pie in the sky efforts to get U.S. taxpayers overseas to pay U.S. tax only on income earned from U.S. sources: a lead balloon, like so called “FATCA” relief”. Not on the Congressional radar.
Postcard filing: Aw come on, you really believe this? Perhaps a Rhode Island sized one … the tax code and your tax rules won’t ever be so simple. They know and so should you.
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of U.S. expats in Mexico. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it., online radio at mixlr.com/orlandogotay or Facebook: GotayTaxLawyer.