But it remains to be seen if the $1.5 trillion tax code is a glistening gift or cash coal. So, we got some local financial experts to weigh in on the changes that take effect Jan. 1.
Curt Walburg, a Grand Haven-based CPA, is a fan of the new tax rules. He noted that the “average” taxpayer is an employee, earning less than $100,000.
“I believe they're going to see a lower tax as a result of this bill,” Walburg said. “We've been doing analysis and are seeing that. One thing that's been said is that this is detrimental to homeowners and may reduce the incentive to buy a home. I'm not finding that for the average Tri-Cities homeowner.”
Most residents fall into the current 10, 15, 25 and 28 percent tax brackets. Those will be changed under the new law to 10, 12, 22 and 24 percent, and that could mean more money in locals’ pockets, according to Walburg.
Personal exemptions will disappear, but the standard deduction will double, to $12,000 for single taxpayers and $24,000 for married couples.
Walburg said about 25 percent of his clients haven't itemized in the past, because they didn't have enough deductions.
“With this $24,000, that's going to go up significantly,” he said. “And, for the IRS, that's been their goal for years, to raise the standard deduction so they don't have to spend so much time picking on little stuff. You used to be able to deduct steel-toed boots, and executives used to be able to deduct the Wall Street Journal.”
Walburg said the new tax code affects just about everyone.
“For the average individual, I do believe this is a win to reduce the amount of time preparing tax returns, and the increased money back or reduction in what you have to pay,” he said.
Capital gains rates will remain unchanged, but there's an item in the tax code that could affect a lot of people that isn't being talked about much, according to Walburg.
“This hasn't been hit in the news much,” he said. “In the past, you could live in a house for two years and move and use the income exclusion to avoid any tax on a gain of that house. That's been stretched to where it's going to require five years in a house. It used to be two out of five years. Now, it's five out of eight years.”
Walburg said that could become problematic for people who get transferred for business, or people who like to buy a house, fix it up while they live there, then sell it in a couple of years for a profit.
“Five years, that's a pretty long time,” he said.
Michelle Hanks, a Spring Lake-based CPA, doesn't share Walburg's enthusiasm for the new tax code.
“This is truly one of the worst things I've seen in my career,” she said. “There is absolutely no tax simplification here.”
Hanks said she is still working through all the details, but there are many changes. She said the short time frame, with the new rules taking effect Jan. 1, makes it especially difficult.
“After being told by our president that he would like to see tax preparers put out of business, and then give us six days to implement and prepare for a lot of complex changes, is sickening,” she said. “The examples that have been provided are really not realistic examples.”
Hanks suggests some general tax planning items for individuals to consider before the calendar flips to 2018, including paying state income taxes due before Dec. 31, accelerating charitable contributions into 2017 and paying 2 percent itemized deductions by year’s end.
Hanks noted some pertinent changes:
— A $10,000 cap on deductions related to state and local income, property and sales taxes. The act allows no deduction for prepayment.
— The child tax credit is doubled, and the threshold is increased.
— There's a new 20 percent deduction on qualified business income from sole proprietors, S-corporations, LLCs and partnerships.
— 529 plans are amended to allow tax-free distributions for K-12 private school tuition and expenses.
— Alimony deductions are repealed after 2018.
— The individual health insurance mandate is repealed as of 2019.
Although changes are many for corporations, as well, the biggie is a flat corporate tax rate of 21 percent.
Hanks said she participated in a tax update seminar this week.
“There's still not much guidance and there is a bit of speculation as to how the law will be applied,” she said.
The IRS plans to issue new withholding tables in January, which will be implemented in February.
“If a taxpayer were to save $600 in taxes, their paychecks would go up $11.53 per week,” Hanks said. “Not sure that the average hourly worker will even notice.”
Grand Haven-based attorney Michael Van Tubergen said he hopes the new tax plan will be a positive for local residents.
“I think, in the short term, it's going to be good because the vast majority of members of this community are going to see a decrease in their taxes and they'll have more spending money,” he said.
But, there's a chance the changes could backfire.
“The goal is, by reducing taxes, the handcuffs will come off business and the engine will fire up and we'll have this great reinvestment of local manufacturing,” Van Tubergen said. “If that actually happens, this is a great move. If it doesn't happen, then adding to the (national) debt is a bad idea. The only way they can offset that is by cutting benefits.”
Van Tubergen said he is cautiously optimistic.
“In the short term, I think it's great for business and I think it's great for residents,” he said. “Long term, we'll have to wait and see.”