GOP tax plan could trash the value of two popular tax breaks

Personal Finance

Details leaking out about the Republican tax reform plan hint that while two popular deductions would remain intact, they’d become useless to the majority of taxpayers who now take advantage of them.

GOP lawmakers have signaled they’ll retain the tax breaks for mortgage interest and charitable contributions even as they pursue eliminating others.

Yet given that President Donald Trump on Tuesday said that the plan is to nearly double the standard deduction, “many current itemizers would choose that instead, so a lot less people would use those deductions,” said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center.

Currently, taxpayers choose between the standard deduction or itemized deductions and use whichever amount is greater to reduce their tax bill. For 2017, the standard deduction is $6,350 for individual taxpayers, $9,350 for heads of households and $12,700 for joint filers.

In other words, if those amounts nearly double as discussed by both Trump and congressional Republicans, a married couple would need deductions to exceed $24,000 to make itemizing worthwhile.

The Tax Policy Center estimates that of the 45 million tax filers who itemize, 38 million, or 84 percent, would opt for the $24,000 standard deduction because it would exceed the combined value of other deductions available to them.

Trump is expected to deliver a speech Wednesday in Indianapolis that will offer more specifics about what plan will emerge in Congress, although it’s unclear how detailed the reveal will be.

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