By Rod Lee
For Tom Dufour and Mary Tolic who should and do know a little something about such subjects, the “Tax Cuts and Jobs Act of 2017” is the proverbial mixed bag of good and bad for residents of the Commonwealth about to file their tax returns for 2018.
Mr. Dufour is general manager/franchisee/senior tax consultant at Liberty Tax Service with offices on Southbridge St. in Auburn and Greenwood St. in Worcester. He is also the son of the late Wilfrid Dufour who operated a tax business (Tax Matters) in Millbury Center and Auburn from the mid-1970s until his death at the age of seventy-one in 2014.
Ms. Tolic runs Money Matters on Main St. in Oxford. She once worked for Wilfrid Dufour.
The Tax Cuts and Jobs Act of 2017 instituted the most sweeping changes the system has seen since 1986. Personal exemptions can no longer be written off. The child tax credit doubles. The total amount of taxes a filer is able to claim as itemized deductions is capped at $10,000 for state, local and real estate taxes. The standard deduction for those married or filing jointly is $24,000 (up significantly from $13,000) and $12,000 for singles (up from $6500).
“For some people the changes are very beneficial, for others there will be big challenges when do their tax returns,” Mr. Dufour said by telephone prior to welcoming a visitor the afternoon of January 8th in Liberty Tax Service’s USA-themed suite in the West Side Plaza in Auburn. The standard deduction of $24,000, for instance, he said, “makes it a higher target for itemized deductions.”
One segment of the population that will be affected in Massachusetts is the elderly, Mr. Dufour said. “Massachusetts doesn’t do itemized deductions the same as federal but if you itemize on your federal return you can use medical as a deduction on your state return. If both of you are over the age of sixty-five there is a number you have to hit in order to itemize--$26,600 instead of $15,400. So there is a higher tax liability in Massachusetts.”
Katie Mironidis of Massachusetts Business Associates said the increase in the standard deduction was the Act’s most notable feature and a positive development—in her opinion. “The reason is, [the government] wants people to stop itemizing, so everyone benefits,” Ms. Mironidis said. “I think they’re doing their best to make things simpler. On another note,” however, she said, people who had a lot of deductions aren’t going” to realize a gain. But “the tax brackets are adjusted—that will help.” Overall, she said, “I like it. I’m happy.”
Addressing the implications of the Act in her office just north of the traffic light in Oxford Center, Ms. Tolic said nurses, salespeople and others who took advantage of a deduction for employee expenses that they are not reimbursed for are going to suffer under the reform law the GOP put through.
“These people spend money out of their pocket,” Ms. Tolic said. “They’ve totally eliminated that. That’s one of the big ones that I think is horrible. It is a real pain for people using their own car for work and not getting reimbursed or getting reimbursed less that the standard amount. Even people who work out of their home. It will cost nurses,” for example, she said, who face expenses for “uniforms, licensing and continuing education.”
Mr. Dufour noted too that with the $24,000 standard deduction in place, mortgage interest, property taxes, charitable and “other” will have to exceed that amount in order to be deducted. This may reveal, as tax returns are prepared for submission, that people gave less to nonprofits than they typically would, in 2018. “In the past,” he said, “there was a higher likelihood that charitable donations would be used. Now people might be less apt to give if they see no benefit.”
While the child tax credit is doubling provided the child is under the age of seventeen at the end of 2018, Ms. Tolic said there is a down side with “no more personal exemption.”
Although more of the credit is refundable (up to $1400), there is a much smaller credit this year for other dependents: an aging parent who you are providing care for, or an older child you are providing support to. No longer being able to claim this $4050 has been described as “a significant blow to family caregivers.”
In affirmation of Ms. Mironidis’s take on itemization, the Joint Committee on Taxation has estimated that 94% of taxpayers will claim the standard deduction for 2018, as opposed to 70% doing that previously. That means no Schedule A, less recordkeeping and less tax prep time. But it also means charitable contributions will effectively no longer be tax deductible for many taxpayers because they won’t be itemizing.
The good, the bad and the ugly.
Contact Rod Lee at [email protected] or 774-232-2999.