6 Reasons The Senate Tax Bill Is Bad News For Moms
Early on Saturday, December 2nd, the Senate passed its version of the Republican tax plan. If this feels a little like deja vu, that’s understandable as the House passed a similar (although not identical) tax bill in November. Chances are good that one of the bills, or more likely a combination of the two, will be signed into law by President Trump. So what does this mean for you? Here are six ways the bill could impact your family:.
1. Families with three or more children would be penalized. Both bills eliminate the $4,050 per-person personal deduction. To offset that loss, the bill increases the standard deduction to $12,000 for a single person (up from $6,350), or $24,000 for a couple (up from $12,700). Not only would you no longer be able to claim the personal exemption for yourself, but you won’t be able to for any of your kids either. While the new standard deduction will help some families, those with three or more kids might not find much relief, if any, even after taking advantage of other personal tax provisions or cut.
2. Low-income families will suffer the most. To make up for the loss of the personal exemption, the Senate bill increases the child tax credit from $1,000 to $2,000 per kid. Sound nice? Not so fast. First, the increase is only temporary and will expire in 2025 (along with all the other personal tax cuts in the bill).
Second, the credit is only partially refundable. If you’re set to get a refund, you’re only eligible for the original $1,000 per child; the second $1,000 only applies if you have to pay the government. This double-whammy will particularly hurt low-income families, experts say. However, it will benefit wealthy families, as the bill increases the income threshold to be eligible for the credit to $500,000 per year. Under this plan, a family making minimum wage won’t be able to take full advantage of the increased child tax credit, while a family making $499,000 will suddenly become eligible for it.
3. Owning a home could become more expensive. If you’re a homeowner, you may have taken advantage of the mortgage interest deduction before. The Senate bill maintains the current mortgage interest deduction cap of up to $1 million. However, because the bill increases the standard deduction, it’s likely that most people will no longer itemize their deductions — wiping out a key tax benefit of owning a home. The bill also caps the amount of property taxes you can claim to $10,000. Lastly, it increases the amount of time you have to live in your home before you can sell it and avoid paying the capital gains tax. Under current law, if you sell your house for more than you bought it, you don't have to pay taxes on the first $250,000 if you can show it's been your primary residence and that you've lived there for at least two of the last five years. The Senate bill will change the requirement to five of the last eight years.
4. Your health insurance could go up. Both bills eliminate the Affordable Care Act (ACA) mandate that fined people who refused to buy health insurance. This means that many younger, healthier people may pull out of the open insurance market which would increase prices for the people remaining. Since women, especially those who are considering having a child, need to have insurance, this will disproportionately affect moms and moms-to-be, experts say. In addition, this may allow insurers to again offer plans that allow them to ban people with pre-existing conditions or refuse to cover things like prenatal and maternity care.
5. You may be able to deduct more medical expenses. A small upside: You may get to deduct more of your health expenses from your taxes if they exceed 7.5% of your annual income, under the Senate bill — but this only applies for 2018 and 2019, after which the deduction will revert back to the regular rate, 10 percent.
6. No more state and local tax exemptions. In the past, families have been able to deduct the amount of state and local taxes they pay from their federal taxes, essentially keeping their tax dollars local to their communities for things like schools. This exemption is eliminated under the Senate bill — and will cripple public schools, which rely on this money for funding.
What happens next?
The Senate and the House can either accept one of the bills as is or mash the two together for some kind of compromise. This means we can’t know quite yet exactly what the final version will look like, but most experts agree that in the long run, your taxes will likely increase.
To see how your family will fare under the Senate plan or the House plan, compared to the current tax code, check out this detailed analysis from the Washington Post. And if you're at all worried about the effects of the bill, call your representatives and let them know.
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