Proposed Budget Plan Limits More Than Deductions

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The news has been full of President Obama’s proposed budget plan. It’s highly unlikely that it will pass as is, but it’s still good to take a look at the tax changes being proposed. They give us good insight to the type of things that are on the table, at least for one side of the budget discussion.
There is a new proposed 28% limitation on itemized deductions such as charitable contributions and mortgage interest and a few new things: employer provided health insurance and interest income on state and local bonds.
This will be applicable to anyone making more than $200,000 (single) or $250,000 (married, filing jointly)
If your current tax rate is higher than 28%, then you will have to pay the difference between that amount and 28% as a tax rate on tax-exemption income. For example, if you currently paid the highest rate of 39.6%, your tax exempt income would be subject to 11.6%.
There is also a proposed cap on charitable giving. There’s already been a lot of controversy about this one, so it’s unlikely it’ll pass without a lot of hoopla.
Remember that tax changes don’t just happen at the federal level. Many of the state will follow the same tax treatment, so there could be some large changes to your tax in the near future at the state level as well. Remember to keep in contact with your CPA. If we can help, let us know! Maybe it’s time for a quick check up to make sure your strategy still works.

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