On Sunday, October 30, 1938, Mercury Radio Theatre fans, who were listening to Ramon Racquello and His Orchestra, were interrupted by a news broadcast reporting an odd explosion on the planet Mars. Soon after, they learned that a cylindrical object had fallen on a farm in Grovers Mills, New Jersey. The radio audience listened in horror as a pulsating Martian emerged from the cylinder and obliterated the crowd with heat rays. Soon, an entire army of Martians had invaded New York, and very real panic had spread across the country.
Last week, something a bit similar happened in the tax world. (Well, except for the Martians, heat rays, and destruction of Gotham.) After just six weeks of consideration, the House and Senate passed the Tax Cuts and Jobs Act of 2017, the biggest restructuring of the tax code in 31 years.
We don’t usually use these emails to discuss “hard news” like the new tax bill. It’s much more fun to walk through the “Twelve days of Taxmas,” or how celebrities use offshore tax havens, or harken back to taxes in the 1980s as we enjoy Season Two of Netflix’s Stranger Things. But this new tax bill is simply too big to ignore. And so we interrupt our usual broadcast of fun tax stories for something a bit more serious.
We shouldn’t need to tell you much about the nuts and bolts of the new law — the lower tax rates, lower deductions, and new “qualified business income” rules for pass-through businesses. The news is already full of those discussions. Over the coming days and weeks, we’ll be putting together material explaining how the new bill could affect you.
But we’re going to do things a little different from everybody else. Most of those news outlets will be writing about how much you’re going to owe under the new law. And that’s important. But we’re going to focus our effort on how you can pay less. And in the end, that service is even more important. Most tax professionals do a perfectly good job of putting the “right” numbers in the “right” boxes on the “right” forms. But then they call it a day. Our real value comes from delivering the proactive concepts and strategies that most tax and financial advisors simply overlook.
Of course, we’ll also be highlighting some of the more absurd aspects of the new law. For example . . . under the old law, you could exclude a whopping $20 of income per month for expenses related to riding your bike to work, so long as you weren’t getting other pretax transit benefits. The new law lets the air out of that benefit. And how much will putting a nail in that benefit save the Treasury? Austin Powers fans, channel your best Dr Evil voice and say it with me . . . “one . . . million . . . dollars.” A rounding error, at best.
Here’s another one you might like a little more. Under the old law, Code Section 162 said that members of Congress could deduct up to $3,000 per year for their living expenses while they’re away from their districts. At this point, though, Congressional net worths are hitting all-time highs (Montana Rep. Greg Gianforte, who started two software companies, is worth $315 million). And congressional approval ratings are hitting all-time lows, hovering somewhere around 11%. So the new law eliminates that little boondoggle.
This is the last time we’ll be writing to you in 2017, and 2018 promises to be a busy year, full of opportunity and promise. So count on us to help you navigate the new rules, as you ring in the New Year. And don’t forget, we’ll be here for your family, friends, and colleagues, too!
Photo Credit: geralt [Creative Commons CC0], via Creative Commons