Although I would prefer not to give the exact numbers, I am an engineer in my late 30s who earns between $100,000 and $150,000 a year and my tax filing status is single. Last year I got a tax refund of over $3,600 due to interest on two mortgage loans I pay every month, my primary mortgage and a home equity line of credit I took out five years ago to consolidate unpaid loans and credit card debt. This year my tax refund is less than $600 due to changes Trump and the Republican Congress made to target NY tax payers like me for a tax hike. Mission accomplished! Is America Great Again Now?
The first change that caught me by surprise was eliminating the deduction for my home equity loan, maybe I could have refinanced my debt another way if I knew the GOP was going to pull the rug out.
From IRS.GOV:
Deduction for home equity interest modified.
Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home.
For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.
Great, so if you get a vacation home the debt is still deductible but not student loans or credit cards. Guess their logic is pretty clear, big campaign donors have vacation homes, but less wealthy people do not. So that change alone dropped my deduction by about $1,800 dollars. Thanks Trump!
Next is the hit I was expecting but did not realize would be so steep, the change in the state and local tax deductions designed to target Democratic voting states with high property or state income taxes.
From IRS.GOV:
Deduction for state and local income, sales and property taxes modified.
A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction. The limit is $10,000 - $5,000 if married filing separately. Anything above this amount is not deductible.
This ended up costing another $3,700 from my deduction, thanks Trump, bringing all of my itemized deductions from $19,700 in 2017 to $14,200 in 2018, a $5,500 drop although still more than the new $12,000 standard deduction that was supposed to ensure middle class tax payers were not affected.
Last but not least is the loss of personal exemptions, which went from $4,050 in 2017 to $0 in 2018.
From IRS.GOV:
Personal exemption deduction eliminated.
Personal exemption deductions for yourself, your spouse, or your dependents have been eliminated beginning after December 31, 2017, and before January 1, 2026.
Including both itemized and personal deductions, this went from $23,750 in 2018 to $14,200 in 2018.
As a result, instead of the $3,600 tax refund I was expecting to spend, now I get back less than $600. Overall, where as I paid around $29,000 in income taxes last year, this year I have paid over $32,000.
Thanks Trump!