How the tax bill will impact Tennessee Valley residents - WRCBtv.com | Chattanooga News, Weather & Sports

How the tax bill will impact Tennessee Valley residents

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CHATTANOOGA, TN (WRCB) -

The tax bill will now head to President Donald Trump's desk for him to sign.

The House has given the final green light needed for the biggest tax reform in decades. Members of Congress passed the bill on Tuesday.

Overnight, the Senate voted 51 to 48 in favor of it. No Democrats in either the House or Senate supported the measure.

12 Republicans voted against the bill.

"It is a lot to take in and specifically, this is one of the largest overhauls of the tax code in 10 years," Bryan Kelly, a financial planner, said.

Kelly is a managing partner of Tandem Financial Enterprises of Ameriprise. He shared five changes that will impact taxpayers. 

Changes

  • 529 accounts can now be used for K-12 educational expenses. They're traditionally for college planning.
  • Child tax credits are doubling to $2,000 per child.
  • Standard deductions are doubling.

"It just immediately makes a bottom line impact and effectively knocks $12,000 off of your taxable income if you're an individual and $24,000 right off the top if you're married and file jointly," Kelly said.

What that will do is reduce the number of people who itemize on their taxes.

Other Changes

  • Tax brackets are different.
    • The marginal tax rate will be cut by one to four percent.
  • The insurance penalty has been repealed.

"The fact that people are going to see an increased paycheck pretty much right away in 2018, I think is going to make a lot of people very happy especially with the short-term outcome that we'll see," Kelly said.

Before the bill, taxpayers were penalized if they weren't enrolled in an insurance plan. That won't be the case anymore since it's been repealed.

Kelly said filing your taxes for 2017 will be very similar to what you're used to, but it'll be a much different scenario for 2018.

Charitable Donations

Tennessee Valley non-profits could take a hit with the new tax bill passed by the House and Senate.

The higher standard deduction would remove the financial incentive to itemize deductions including charitable donations.

A financial planner Channel 3 spoke with said non-profits will need to look at their fundraising strategies for next year. If they don't, this could have a negative impact.

Millions of charities rely on donations to fund their missions. The tax bill passed this week could make that harder for them to achieve.

"How organizations respond to this change in the tax law is going to indicate how successfully they're going to navigate it," Kelly said.

The standard deduction, which most people take, is doubling. It'll be $12,000 individuals and $24,000 for couples.

One report said 28 million people may no longer itemize their deductions because of it. That could lead to a $13 billion drop in charitable donations.

Kelly said charities will have to change their strategies.

"If your heart is still for this organization, this community, this church, whatever it is to do well, we need you to continue your support," Kelly said. "Not based on what the tax benefits were and i think most people give not necessarily with an eye towards that in mind anyway. They give because they're passionate."

The higher standard deduction could lead to people dropping off donor lists because there's less of a financial incentive.

Numbers from Giving USA 2017 show $390 billion was donated to charities. Most was from individuals.

The expected change comes on the heels of a tough year for non-profits. Several local charities said fundraising efforts are down this year.

The Salvation Army said they are $30,000 down from this time last year. The Forgotten Child Fund said their toy donations are also down.

The United Way said "this year's fundraising climate has been challenging but  volunteers and staff are working hard to make up the difference."

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