I went to a presentation last week by a CPA who posts at currentfederaltaxdevelopments.com.
His topic? The new federal tax legislation, aka the Tax Cut and Jobs Act, of course. That is the current federal tax development.
My takeaway from that presentation is this: anybody who is not an expert cannot possibly speak authoritatively about the impact of the new federal tax legislation. Anyone who claims to have a simple explanation of the impact of that legislation doesn’t know what they are talking about.
The presenter I heard last week did a great job, but even in a room full of tax lawyers and CPAs, there were lots of questions.
That’s what the IRS claimed, although they apparently settled for a lesser amount in determining the tax due on the singer’s estate.
I have written about this type of situation before. This commentator brings up something I hadn’t really thought about: doesn’t valuing the right of publicity owned by the estate of a deceased celebrity assume that the estate or the beneficiaries of the estate are going to exploit that right? What if they don’t intend to, or they even agree that they won’t?
The right of publicity isn’t like a Picasso painting, that has value whether the beneficiaries plan to sell it or not. The fact that they could market Whitney Houston’s likeness, or her name, doesn’t mean they will, and if they don’t, it’s not worth anything.
I suppose if the estate has memorabilia (tangible items) containing her likeness, those items have value, but the IRS is talking about the right to something intangible and putting a value on it. Even if you don’t think that’s unfair, putting a value on it (like $11.7 million) seems like it would have to be awfully subjective.
When wage withholdings go down, paychecks go up. You’d think that development would get more attention than it has thus far.
This article from the AP that appeared on Tucson News Now had me nodding in agreement until the writer referred to the “significant limitations [in the new tax law] on long-cherished deductions, such as the federal deduction for state income, property and sales taxes.” I don’t think I have ever heard of any federal tax deduction, and certainly not one that probably benefits mostly higher-income taxpayers, as ”long-cherished.”
The mortgage interest deduction could be called “cherished,” maybe (and they did reduce that one for people with new mortgages of over $750,000), but the deduction for state and local taxes is “cherished?” Really?
Are states really going to shift their personal tax levies from income taxes to payroll taxes just to preserve the unlimited deductibility of state and local taxes on their residents’ federal income tax returns?
You’d think that the new federal tax legislation had eliminated entirely the deduction for state and local taxes (“SALT, as the acronym mavens have dubbed it). Remember, however, that isn’t what happened. All the federal tax legislation did was limit the state and local tax deduction to $10,000 per year. As I have alluded to previously, my hunch is that there aren’t all that many taxpayers who pay more than $10,000 in state and local taxes and have more than $24,000 in itemized deductions. You have to have more than $24,000 in itemized deductions to benefit from the state and local tax deduction. Those who do fit that profile are probably owners of expensive houses with big mortgages in high-tax localities.
I could be wrong, but I doubt that there’s a big enough constituency for a shift to payroll taxes that the idea will go anywhere, all the pontificating by politicians and academics notwithstanding.
I don’t remember if I posted about this when it first appeared last January, but even if I did it’s worth another link. It’s an item about the EPA telling people in Alaska that they shouldn’t burn wood to keep warm in the winter. Because it pollutes the air, don’t you know. Better that they freeze to death, or leave the Alaska to the caribou, I suppose.
YES I’M STILL WATCHING THE NEWS ON DRIVERLESS CARS (AKA AUTONOMOUS VEHICLES) AND I STILL CAN’T WAIT UNTIL I CAN USE ONE
A nice, brief rundown on the current state of driverless cars can be found on the Antiplanner’s blog. He links to an article at Boston.com titled “How Arizona became a driverless car utopia.” I like the sound of that.
The Boston.com article is somewhat informative, but the tone is obviously negative (about what you would expect). It trots out the usual cast of self-interested non-profits who always advocate for more regulations. The article also strains to point out the mortal threat to the citizens of Arizona by discussing at length the one (one!) traffic collision reported so far that involved an autonomous vehicle, and all the horrible things that could have happened if only the circumstances of that one collision had been different (i.e. had the collision been caused by the autonomous vehicle, which it wasn’t).
IRS IS WORKING ON NEW WAGE WITHHOLDING GUIDELINES, BUT DON’T EXPECT ANY CHANGE IN YOUR PAYCHECK UNTIL NEXT MONTH
One of the recent changes to the federal income tax that has received less attention than you might expect is the revamp of the individual tax rates. That change, along with the increase in the standard deduction, will probably have a noticeable impact on the tax liability of many individual taxpayers. As a result, you might expect amounts withheld from your wages for federal income tax could be reduced.
To implement those changes, the IRS says, in a statement issued on December 26, that it is working on “new 2018 withholding guidelines [that] will allow taxpayers to begin seeing the changes in their paychecks as early as February.” In other words, don’t expect to see any change to the federal tax withholding in your first couple of paychecks this year. The IRS statement adds this helpful advice for your payroll department: “In the meantime, employers and payroll service providers should continue to use the existing 2017 withholding tables and systems.”
By now it’s too late to do anything about it, but apparently there was something of a scramble last week as people who think they will be negatively affected by the new limitation on the deductibility of state and local taxes hurried to prepay their property taxes before the new limitation took effect.
I say that it’s people who think they will be negatively affected because, as I have explained already, the dramatic increase in the standard deduction will mean that at least some taxpayers who previously itemized deductions will no longer get any benefit from doing so. You only get a benefit from the deduction for state and local taxes if you itemize, of course.
I suppose that if your property taxes are high enough to be affected by the new limit on the state and local tax deduction ($10,000) and you have a mortgage, chances are that between your deductible mortgage interest and your property taxes, your itemized deductions will exceed the standard deduction. But if you don’t have a mortgage, you may not have enough in itemized deductions to exceed the new, higher standard deduction ($24,000 for married filing jointly, $12,000 for single filers).
I also don’t see why there would have been any considerable confusion about whether or not prepaid property taxes would qualify for the state and local tax deduction. I thought the IRS guidance was pretty clear, and logical. As I said, that aspect of the situation is moot now, anyway.
The contents of this blog, this web site, and any writings by me that are linked here, are all my personal commentary. None of it is intended to be legal advice for your situation.