Effects of Tax Cuts and Job Act on Miscellaneous Itemized Deductions Paper Example

Introduction

Some of the goals of the Presidency of the United States of America (USA) is to provide relief for the middle-income group, simplify the life of its citizens and facilitate the growth of the economy. In this regard, the USA's president signed the bill into law just after the congress passing the Tax Cuts and Job Act in 2017. Lowry (2014) defines 'miscellaneous itemized deductions,' as the deductions subjected to the 2% amount adjusted gross income limitations. Such deductions experience a significant change with any small change in the domestic tax rules. This paper explores the effects of USA's Tax Cut and Job Act on miscellaneous Itemized deductions in the county.

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Specific Effects of The Act on Itemized Deductions

The dominant effect of the Act is the reduction in the number of itemized deductions from the taxpayers. The five significant itemized deductions on charitable contributions, medical expenses, mortgage interest, state and local taxes and medical expenses will all experience a change in their approach of how they impose the tax to their clients (Bankman, Shaviro, Stark, K. & Kleinbard, 2018). The Act will thus lead to a drop in the household shares by at least ten percent.

The Act has deleted the practice on the miscellaneous itemized deduction in government publication compared to its method in the past years. The law has led to losses by the taxpayers and companies at large. Lately, the two entities do not get benefit from the deduction compared to the previous times (Kamin et al., 2018). The Act also imposes new turn around to the alimony rules. The result is changing it to a non-tax deductible for the payer and tax income for the payee. A review of the past shows that the economic experts never considered the two. Secondly, after the divorce reforms, has exposed individuals to a hike in the standard deduction. The effect contradicts their assumption of the end of the case after separation. This effect is converse to the initial conditions which favored both partners after divorce (Lowry, 2014).

The Act will lead to un-applicability of income phase. This effect results from the government involvement in the steering wheel that will enable them to control the collections (Bankman, Shaviro, Stark, K. & Kleinbard, 2018). During the initial conditions, income was high and gave no room for such increased deductions. The Act has led to modification on the equity loans. The law restricts the deduction of interest rate normal circumstance. The law sets the qualifications of loans for deductibility after it the money loaned facilitated acquiring an asset like a building. This move suppresses investors.

The charities sector faces suppression from the law as it limits the amount to be donated. The law also affects employees because their employers will opt not to consider the expenses they use to facilitate the progress of the business. The law constrains the repayment of such monies. The Act does not account for such costs. The implication is that the employees risk losing such funds. Also, some of the expenses like moving expense are not entitled to a refund by the new law (Kamin et al., 2018).

Conclusion

The Tax Cut and Job Act affect the miscellaneous itemized deductions. The effect ranges from the large-scale applications like constraining the tax collection departments, meddle organizations like marriages to individual level like the expenses of the employees. Analysis of the effects signifies an immediate short-term adverse impact of the law on the economic plan. However, with proper measures, the Act will promote the economy of the USA due to the sealed loopholes of financial loses.

References

Bankman, J., Shaviro, D. N., Stark, K. J., & Kleinbard, E. D. (2018). Federal Income Taxation. Aspen Casebook.

Kamin, D., Gamage, D., Glogower, A. D., Kysar, R. M., Shanske, D., Avi-Yonah, R. S., ... & Miller, D. S. (2018). The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the 2017 Tax Legislation. Minnesota Law Review, 103. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3089423

Lowry, S. (2014). Itemized tax deductions for individuals: Data analysis.