A wave of recent media reports indicates that a large number of taxpayers are angry this filing season. Some people point out that the public reaction is illogical because the total amount of income taxes actually is actually lower for most people. Yet there may be good underlying reason for that anger. Originally we read that only 1 in 16 filers would pay higher taxes because of the new tax law. That turned out to be an overly rosy forecast. We still do not have a reliable figure. Meanwhile, IRS now says that 1 in 5 tax filers will owe them money at tax filing this year. My latest results indicate that 1 in 3 people within certain demographic groups (two incomes, two houses) are paying more in total income taxes than last year. The anger surfaced among the “core voters” and creates some confusion among tax professionals. If you are an upper middle class taxpayer in my greater Philadelphia region with a vacation home, then the chances are even greater that your taxes went up as a result of the Tax Cuts and Jobs Act.
Perhaps even more important to consider; the new tax law is deliberately designed to raise almost everyone’s taxes over time. Many of the tax breaks introduced in the Tax Cuts and Jobs Act expire December 31, 2025. A summary of expiring tax breaks is available for download from the Tax Foundation. Since these tax cuts are fiscally unsustainable, we should not expect Congress to extend them. Even though 2025 sounds like a long way into the future, it takes years for the best financial plans to reach maximum tax efficiency.
The only good news is that there are plenty of opportunities within the law to reduce or eliminate income tax. This is especially true for people who have a long term plan to build a tax-free retirement. But since everyone’s situation is different, every financial plan to minimize taxes will be unique.
I welcome the opportunity to discuss your plans for reducing income taxes and increasing the amounts that contribute to your long term success.