Over the past several months, Senate and Congressional Hearings on the HR1 tax reform have been pipped in daily, and from every direction. Recently however, my ears perked up as one CSPAN broadcaster, a super-clever-guy (playful sarcasm implied), hired to explain the details and break down the nuances of the bill, began explaining its complexities in a short and precise way—It was surprisingly engrossing to listen to. He was artful; it made me want to grow up to be just like him. Likewise, the partisan nonsense—of which there was an excess, was also entertaining .
Prior to the bill passing I was anxious to update my tax planning software. I was fired up to see how it all worked in real life, before the inundation of worried client calls and emails began rolling in. With each new call or email they said they were perturbed, or even annoyed, by the media and political contradictions, and they were looking to me to shed some light on the validity and truth behind the information they had been consuming.
One email was particularly angry. The email started by declaring that,
“Trump and his friends were the only ones who were benefiting!”
and how his family was “getting screwed,” not to mention the subtle innuendos that this was somehow my fault. On one hand, it’s easy to understand why this client was angry; this bill was enacted, but who really knew how it would affect, not just their finances, but their lives. On the other hand, I wanted to get past the speculation. So, I fired up my newfound tax analysis software, and Angry Man’s family and business were first in the queue.
“No way in hell can that be correct”
and “you gotta be kidding,” was what I heard myself saying while examining the columns and comparing the years. I went back over it, I triple checked that the facts were aligned—the results of the analysis seemed too drastic. But there it was—the truth. It had finally emerged from the mucky mess.
Angry Man’s taxes were seriously lessened. Not a little 1000 or 2000 here and there, but FIVE decimal points worth of smaller payments going into the IRS’s pocket. The previously muddled truth was not just in the reduced tax brackets, although that was a nice start.
The truth for this client, was that his tax relief could be found in a several places:
- The AMT (Alternative Minimum Tax) phase-out, significantly reduced the previous negative impacts of the ‘state tax deduction elimination’ and ‘the 10k limit’ on one’s property tax deduction.
- The doubling of the standard deduction (which now applies to everyone).
- Lower tax rates for S-corps and the one year expenses of certain business expenses/investments.
I went on to study Julie Kyle, Jonathan, David’s data…all very different family/business facts, and all the same outcome—tax relief. Yes, each of the clients are different and so was the amount of tax relief but in almost every case they had more money to prepare for their retirement, to take care of their kids, to spend in the economy. What was true for all of them? It all goes back to the old adage, ‘Ask and you shall receive’. If I can break down this complex reform and set my client’s minds at ease, i’d be accomplishing one of my own New Year’s resolutions in the process, i.e. helping clients and friends, find the simple truth, more easily and more often.