Over the past few days, we've been covering a lot of different aspects of the massive tax reform that is set to take effect next year. We've covered the basics, we looked at how it will affect the Southern California economy specifically, whether the state's GOP lawmakers will face political backlash over their support for it, and how it will affect non-profits.
But now, it's time to take on YOUR questions about the bill, which passed both houses of Congress Wednesday. Accountant Eva Rosenberg, also known as the Tax Mama, has some answers.
Gaming your taxes
Now that it's passed, the tax bill is heading over to President Trump's desk for his signature. In the meantime, Rosenberg had these tips on how to 'game your taxes' in the coming year.
- If you have sales taxes that you need to prepay, get those out of the way.
- Charitable contributions - Make as many as you can. That will be a huge help.
- What else can you prepay? If you have things like union dues or things like that that you're going to have to pay next year anyway, go ahead and do that.
- When it comes to businesses this is a good time to meet with your tax pro. "All of us are scrambling to come up with great planning ideas," said Rosenberg, "but wait until next week after we figure it out."
How will student debt fare?
"Well, Crystal, I have good news for you. There was a lot of talk back and forth between the house and the Senate about abolishing this. It ended up that they didn't touch this. So you can still deduct the student loan interest just as you did before."
Los Angeles is a city of freelancers, and the will be greatly affected by this new tax bill. It's something we've looked into before, but we received a couple questions from listeners that asked for more specifics.
"All of these people who have unreimbursed business expenses will not be able to deduct any of them in the future."
And though this is not ideal for freelancers, Rosenberg lists out a couple of options:
"Renegotiate your contract with your employer to have them pay your expenses for you so you don't have unreimbursed business expenses or start your own business and negotiate a contract with your employer because businesses can still take most of these deductions."
"Entertainment expenses are gone entirely, whether you are the employer or the employee, [EXCEPT] the meals and the travel expenses...if the employer pays them can be deducted and the meals are still reduced by 50 percent, but they can't be deducted by the employee. So we're back to renegotiating our contracts."
The short answer to this big picture question? It's complicated.
"They've brought the corporate tax rate down so that could be a good thing. The alternative minimum tax on corporations was completely eliminated, but they didn't eliminate it on people, they just raised the limits on alternative minimum taxes...we've got all these pass-through entities that most people have like partnerships or 's corporations' and so we have these new little deductions that apply to some businesses and not some businesses. "
Some bonus info
Rosenberg left us with these last few important tidbits of info regarding Obamacare penalties.
"Last year for the 2016 tax return, the IRS had this 'don't ask, don't tell' policy. So if you didn't answer the question, they didn't charge you the penalties."
This year, that's not the case.
"They eliminated the Obamacare penalties for not having insurance starting in 2019, not 2017 or 18. So, everyone filing their 2017 tax returns will still be facing some pretty nasty penalties if they didn't have insurance."