Have you had a hard time understanding what to expect from the new tax reform bill?
Are the details confusing because of political bias and debates on the news?
The video in this post will tell you the basics of the bill in a simple way, using no numbers! Below are some key definitions:
Deduction: a tax deduction is an expense or an amount that is used to reduce taxable income.
Standard Deduction: a specific dollar amount that you can use to reduce your taxable income. You cannot itemize deductions if you elect to use the standard deduction. You may use whichever is higher.
Itemized Deduction: a list of expenses that are added together to get the amount by which you may reduce your taxable income. You cannot use the standard deduction if you itemize deductions. You may use whichever is higher.
U.S. Growth: also known as U.S. GDP (Gross Domestic Product) or the value of the goods and services produced by the United States. The rise in value indicates a state of growth for the country. There will be cycles when the value of goods and services rise and fall. See our blog post, here, about these cycles.
U.S. Federal Deficit or U.S. Borrowing: When the government collects taxes, it uses that money to pay for a variety of government programs and expenses. If taxes decrease there will likely not be enough money to continue with current government spending requirements. To cover the shortfall, the government must reduce spending and/or borrow money through the issuance of U.S. bonds. Those bonds are often purchased by other countries and the U.S. would have an obligation to pay those bonds back at a future date with interest.
Once you understand the key points in the video I encourage you to do your own research and to develop your OWN opinions. There is always a give and take when it comes to tax reform. No one has all the right answers. Knowledge is key!
Continue to educate yourself as the bill becomes law and impacts your taxes for 2018. Don’t be afraid to seek a tax professional to ask questions or to complete your taxes for you. Ask for referrals to find the right person and interview a few before deciding on a professional that is right for you.
To view the video clearly be sure your settings (click the gear at the bottom of the video, it may default if viewing from your phone) are set to at least 720 dpi.
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