December 9, 2019

REBNY How To: Federal Tax Reform – New Rules, New Headaches, New Opportunities – Episode 1


Hi, I’m Lary Wolf and this is my partner
Stuart Gross. We’re from the law firm of Roberts and Holland. We’re gonna talk today about the new tax law which was enacted at the end of December of last
year (2017). As with most tax legislation there are
winners and losers. Real estate as a whole is considered one of the winners.
We’re going to walk through the topics that affect individuals and real estate
in particular. Although of course with a 1 + trillion dollar deficit impact there were more winners than losers in this one, Larry. This tax legislation was put
through in sort of a rush; we’re gonna need some guidance from the Internal
Revenue Service or from Congress to help fix some of the mistakes and to
answer some of the questions that are raised. So, the first thing we’re going to
talk about is changes in tax rates. The corporate tax rate was reduced from
thirty five percent all the way down to twenty one percent, and that’s a
permanent change. The individual rate was reduced from a top rate of 39.6%
to 37%. Other changes we’re going to talk about didn’t get the same
permanent benefit that corporate changes got, and will phase out or be eliminated
after 2025. The rate on dividends stayed at 20 percent; the rate on capital gains
stayed at 20 percent. They also made some changes in the
bottom brackets and tax liability at a given level of income – one hundred, two
hundred, three hundred thousand dollars – is actually lower even before you get to
the highest rate. They also played with the marriage penalty so that at the
lower brackets they basically eliminated the marriage penalty. And that will put additional dollars into people’s pockets as well. They did a couple other things in this regard, they eliminated miscellaneous itemized
deductions… so tax preparation… You’re gonna tell me what a miscellaneous itemized
deductions is? Go ahead Stewart. The most important miscellaneous itemized deductions: expenses for tax preparation, also investment expenses… People who invest in various investment vehicles that give rise to so-called “investment expenses”
previously were deductible to the extent that those expenses exceeded two percent of adjusted gross income. That was an annoying calculation Congress felt that
abuses were going on, and so through the end of 2025 those expenses
as deductions were eliminated entirely. There’s a group of other deductions
I think those are probably the two most important. The standard deduction that
you can take, if you don’t itemize deductions, has been increased. For an
individual it’s twelve thousand dollars, and on the joint return it’s twenty four
thousand dollars. The concept of personal exemptions has been eliminated. You no longer have the ability to claim personal exemptions. That actually sounds
like simplification. [laughing] This tax law is not simple, that was simplification.

Leave a Reply

Your email address will not be published. Required fields are marked *