by Phil Yacuboski
Congress did something in December it hasn’t done since President Ronald Reagan was in office — changed the tax code. Pennsylvania taxpayers will likely see some relief from the GOP tax bill, or will they?
“If you have more money in your paycheck, you’ll spend more of that money,” said Lou Ingargiola, president of Ingargiola Wealth Group in Dunmore.
The tax bill makes a whole host of changes, that Democrats argue will make life worse for Americans – Republicans — just the opposite.
Regardless of what the tax break is, he said, people should consider putting the money into an investment of some sort.
“Hopefully, you’ll save some of that money as well. Even if it’s two percent, I’d rather the two percent in my pocket than the government’s pocket. It just makes people feel good if you have a few extra dollars in your pocket.”
With the corporate tax rate dropping to 21 percent, he said people will notice that in their stock portfolios.
“That has a much bigger effect on everyone else because hopefully when that tax is lowered, companies like Apple will bring their profits back here and they will hire here,” he said, adding that more money would be hired and more people would get raises.
One deduction that remained in flux was the student loan interest deduction. Taxpayers will be allowed to deduct up to $2,500 per year on the interest paid on their student loans. Employee tuition assistance remains non-taxable, meaning your employer can contribute up to $5,250 for continuing education and taxpayers don’t pay a tax on that — a popular tax credit that is often used for people who are trying to get ahead.
Child tax credits will also stay on the books.
One deduction that is going away is the deduction you used to be able to take for the money paid to a tax preparer or software used to file your taxes. The bill also gets rid of the bike commuting deduction, which allowed taxpayers to deduct up to $20 per month on the cost of bicycling to work.
But perhaps the thing Republicans are celebrating most is the repealing of the so-called individual mandate as part of President Obama’s Affordable Care Act, which forced Americans to buy health insurance some argue they don’t want or can’t afford.
“Many individuals are only buying insurance under the threat of the mandate and the concern is that a significant number of individuals will drop coverage,” said Jeff Bechtel, senior vice-president of health economics and policy, The Hospital Association of Pennsylvania. “If this group is healthier than average, and we think that is likely, the unfortunate fact is that people remaining in the insurance pools are likely to be less healthy and more costly to insure.”
He said that will likely increase costs and premiums.
Many argue this is a ‘skinny repeal’ of ObamaCare.
“I think it’s fair to say the Congressional leadership and the administration doesn’t look favorably on the ACA and they’ve long targeted the mandate as government overreach,” he said. “This has been their opportunity to eliminate that element of the ACA.”
On the flip side, Bechtel is happy to see the medical expense deduction remain.
“We’re pleased to see that,” he said.
The new law allows for the medical expense deduction for two years for filers meeting a threshold from 10 percent of their adjusted gross income to 7.5 percent of their adjusted gross income.
“I can’t believe a country like us can’t figure this out,” adding that as a small business owner himself, he said healthcare premiums have gone up ‘tremendously’ in the past four years. “Let’s hope that levels out.”