What Just Happened?
Last week the US House of Representatives passed a tax bill that appears to overhaul the Internal Revenue Code as it has existed since 1986. While many favor simplifying the tax code and its maze of complex rules, the House simplification would have ramifications that require careful thought and analysis. The current Internal Revenue Code was passed in 1986 and took more than 3 years to write; the recent House tax bill took just a few weeks and was passed without a single hearing.
Despite the apparent haste, many Americans still don’t seem overly concerned about the possibility of an overhaul of the tax code. However, it is likely that for many in the middle class, the proposed changes would have a significant increase in their overall tax liability. In addition to changes for the middle class, others such as the elderly or people with disabilities, will also be affected.
Included in the House version of the tax bill, and indeed a major vocalized motivation for tax reform, is a reduction in corporate taxes. The idea is that corporations will be less likely to move overseas to avoid the current corporate tax structure. However, for individuals, the changes are much broader than a change in rate. The House bill proposes to compress the number of tax brackets from 7 to 4 ranging from 12% to 39.6%.
What is of most concern is the elimination of almost every itemized deduction with a few exceptions. The charitable deduction will remain, deduction for real property taxes up to $10,000 will remain, and the home mortgage deduction will remain. However, the state and local tax deduction is eliminated, as is the deduction for tax preparation and many deductions related to paying for college. Of concern for many locally who own a second home or vacation home for rental purposes, the deduction of mortgage interest for second homes has been eliminated. This proposes to have a major impact on the tourist economy, especially in North Carolina.
Furthermore, for many elderly and people with disabilities, the elimination of the medical expense deduction is troubling. Many rely on the medical expense deduction to reduce or eliminate taxes, because they are utilizing a large portion of their income to pay for their much-needed medical services and supports. This includes those paying high health insurance costs, using savings to pay for long-term care, as well as those paying their income as a “co-pay” to their long- term care facility since they are eligible for Medicaid.
In addition to these changes, the standard deduction is almost doubled, simplifying tax filings for many. However, the personal exemption is eliminated. In addition, the proposed estate tax exemption is increased to $11million per person or $22 million per married couple.
In sum, there are sweeping changes proposed in the House bill. A Senate version has also been proposed. While containing some differences, it is not wildly different from the House bill. There appears to be pressure in Washington to get new tax legislation passed before the end of the year. Many feel that it is too early to determine how this tax bill will actually affect the average American, or the net impact on the federal deficit. Stay tuned as this important issue continues to unfold.
Ask Kit Kat – Benefits of a Dog
Hook Law Center: Kit Kat, what can you tell us about the benefits of having a dog?
Kit Kat: Well, there is some research coming from Sweden which says that having a dog might actually extend your life! The research was compiled by scientists from Uppsala University. Sweden, it appears, is the perfect place to conduct such studies. Detailed records are kept on its citizens including hospitalizations, medical history, and even such things as whether they own a dog. Over the 12-year period of the study, what was discovered is that people who had a dog had less cardiovascular disease or die for any reason. This was especially true for single people. Mwenya Mubanga, one of the authors of the study, says, ‘Dog ownership was especially prominent as a protective factor in persons living alone, which is a group reported previously to be at higher risk of cardiovascular disease and death. Perhaps a dog may stand in an important family member in the single households.’
Another interesting finding was that hunting dogs seemed to offer the most protective health benefits. Scientists are not quite sure what is the cause of the improved health benefits. Are people who chose to own dogs a healthier lot overall, or does having a dog lead to one taking more exercise and leading a more active lifestyle? We don’t know for sure at this point, but what the study is definitely telling us is that having a dog may indeed be a life extender.
This study did not tackle the subject of owing other pets, but I would say from informal observation that owning other pets such as cats can be just as beneficial! We felines are very attentive to our parents, and we love them just as much as our canine cousins! (Michelle Cortez, “Having a dog might just save your life, Swedish research says,” from Bloomberg News, as re-printed in The Virginian-Pilot, Nov. 19, 2017, p. 10)
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Letha Sgritta McDowell
757-399-7506 | 252-722-2890
Letha Sgritta McDowell is a Shareholder of Hook Law practicing in the areas of estate planning, elder law, special needs planning, estate and trust administration, asset protection planning, long-term care planning, personal injury settlement consulting, guardianships & conservatorships, and tax law. Ms. McDowell’s clients range from high-net-worth individuals with over $75 million in net worth to families with limited assets.
Ms. McDowell is a past President of the National Academy of Elder Law Attorneys and was named as a Fellow of the prestigious American College of Trusts and Estates Council (“ACTEC”) in 2020. She is certified as an elder law attorney by the National Elder Law Foundation (“CELA”) and Board Certified as a specialist in Elder Law by the North Carolina State Bar Board of Legal Specialization. Furthermore, McDowell is accredited to prepare and prosecute claims with the Department of Veterans Affairs.
Ms. McDowell is currently the chair of NAELA’s strategic planning committee, a member of the Board of Directors for the North Carolina Chapter of NAELA, and a member of the Board of Directors for the Purdue Center for Cancer Research. She is the former Chair of the North Carolina State Bar’s Elder Law Specialization Committee and is the former Editor-in-Chief of “Gray Matters”, the newsletter for the Elder Law Section of the North Carolina Bar Association. She is a consultant for InterActive Legal and has worked on several law and technology initiatives including IBM’s Watson project. Along with her experience practicing as an attorney, she has dedicated much of her time writing for national publications including, but not limited to: Wolters Kluwer, Wealthmanagement.com, the NAELA Journal, Trust & Estates Magazine and many more.
- Elder Law
- Estate & Trust Administration
- Estate Planning
- Asset Protection Planning
- Long-Term Care Planning
- Special Needs Planning