THE EXPIRING GOP TAX ACT

 

The GOP Tax Act (aka “Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” or “Tax Cuts and Jobs Act”) expires on December 31, 2025.  Unless Congress does something, the US Tax Code will revert to what it was on December 31, 2017, for tax years beginning with 2026.

I think it is obvious that Congress will pass substantial tax legislation in 2025.  What it will look like depends on who controls the House and Senate.  (aside - If American freedom and democracy is to survive it is vital that the Democrats win control of both houses and the White House in the 2024 election.)

As I posted when the Act was first past, it contains good, bad, and ugly.  Here is a look at the major tax provisions of the Act affecting Form 1040 that are expiring, and my thoughts on whether they should be renewed.

ABOVE THE LINE:

1. Reduced tax rates.

I would support keeping the lower tax rates and revised brackets of the Act.

2. Replacement of the deduction for Personal Exemptions with an increased Standard Deduction and Child Tax Credit.

I personally preferred the “old” personal exemption deduction, but I would not object to continuing without it and keeping the increased Standard Deduction amounts and the increased Child Tax Credit.  However, while I have no problem with a carryover of excess credits, I strongly oppose all refundable credits, and therefore oppose any unused portion of the Child Tax Credit being refundable.

3 The higher exemption amounts and phase-out ranges of the dreaded Alternative Minimum Tax (AMT).

I support keeping these increases.  I oppose the existence of the AMT and would like to see it totally repealed.

4. The larger lifetime Estate and Gift Tax exemption.

I support keeping these increases.  I am not really a fan of the Estate or Gift Tax – however I support keeping it if it maintains the step-up in basis for inherited assets.

5. Limiting the deduction for job-related moving expenses to members of the military.

I oppose this limit and would welcome the return of the adjustment to income for all job-related moving expenses.  I would not object if this deduction was moved to Schedule A.

6. The Section 199A 20% Qualified Business Income deduction.

I see no reason for this deduction and would not continue it.  I do not believe QBI (basically self-employment income) should be taxed any less or differently than wages, pensions, or other “ordinary” sources of income.

BELOW THE LINE:

1. The $10,000 SALT (state and local tax) cap.

I strongly oppose this limitation on the deduction of state and local income or sales tax and property tax.  This deduction is one way of “geographically equalizing” the income tax (see my commentary “The SALT limitation from a different perspective”).  If it must be continued, the $10,000 limit should be increased to $20,000 on joint returns (and $10,000 for each spouse on separate returns) to make it fair.  

2. The limitation of the deduction of mortgage interest to acquisition debt.

I do not oppose the elimination of the deduction for up to $100,000 of “home equity” debt and would not object to keeping the mortgage interest deduction limited to “acquisition” debt.  I also have no problem with keeping the lower $750,000 principal limit on the deduction.

3. The elimination of the deduction for theft losses and the limitation of the deduction for casualty losses to those occurring as the result of a federally declared disaster.

I really do not care if this elimination and limitation remains or goes away, although if forced to provide an opinion I think I would support reinstating the casualty loss deduction for all casualties.

4. The elimination of Miscellaneous Itemized Deductions that were previously subject to the 2% of AGI exclusion – employee business expenses, investment expenses, tax preparation costs, etc.

I support allowing these types of itemized deductions and would want this deduction reinstated.  I oppose the 2% of AGI exclusion on these deductions.

5. The elimination of the reduction of total itemized deductions based on AGI.

I oppose reducing total allowable itemized deductions based on AGI (a “back door” tax increase) and would want to keep this provision of the Act.

Your thoughts?

If you would like to see how I would totally rewrite the US Tax Code to make it fairer and simpler, email me at rdftaxpro@yahoo.com with “Tax Reform Book” in the subject line and I will email you a pdf copy of my book THE TAX CODE MUST BE DESTROYED.

TTFN