According to analysts the new tax bill being pushed through is going to steal a lot of dreams. What’s at stake? What can you do about it?
Analyst reviews of the big tax bills expected in the next few weeks claim that it means more breaks for the richest, and bigger bills for the middle class.
While there are many positive things about simplifying taxes, as is being attempted with this bill, it’s really hard to make ends meet, and to help everyone evenly. Bloomberg says that while the wealthiest will get a tax cut of around $278,000 under the new plan, those earning $50,000 to $75,000 could be among the hardest hit, with many paying more in tax, starting in 2018.
While hardly unbiased, the New York Times drives this message even harder home, by listing out many of the tax breaks which could be lost under the next bill. Many of which could change people’s dreams for the future.
This includes cutting breaks for:
Adopting a child
Chronic and dependent care
Financing affordable housing projects
Education and college
Investing in renewable energy
Other breaks that may be on the chopping block include mortgage interest, state income taxes, and property taxes.
This certainly isn’t going to make it easy to get ahead if you aren’t a top earner or business owner. So, what can you do?
The system set up to just keep making the rich richer, and the poor poorer, the obvious answer is to try and make that leap to being an upper income earner sooner. Of course, that is much easier said than done. However, there are two paths which seem to have left a door open for those who want to build their income and wealth faster, without getting hit harder by taxes. One is to start a business, especially with business taxes expected to be slashed in the new bill. The other is to put as much of your income as you can into your self-directed 401k or IRA and use that to invest. That can give you either an immediate deduction in the same year, with deferment of annual taxes on gains, or tax free gains with a Roth IRA.
At the same time it has never been more important to be careful with personal finances, and to avoid overpaying for things. This is especially true when it comes to items like property taxes, which may soon no longer be tax deductible.