$4,000 Deduction is Not $4,000
We saw a Fox Business Headline indicating that a proposed tax Act by the Republicans would put $4,000 in the pocket of Americans. The headline is wrong.
The House Republicans last week issues some tax bill packages. The main one would unwind some of the effects of the 2017 Tax Cuts and Jobs Act. It would bring back 100% bonus depreciation, allow depreciation and amortization to be deducted for interest expense calculations and undo the R&D expense amortization rules that went into effect last year.
However, there was a separate bill that would increase the standard deduction by $2,000 for singles and $4,000 for married filing jointly filers. Fox Business then put the following headline:
“New GOP tax package would put $4,000 back in American families’ pockets”
Increasing the standard deduction by $4,000 and renaming it as a “guaranteed deduction” never puts $4,000 into a families’ pockets. At best, it will put $4,000 times the tax rate into their pockets and if their total itemized deductions exceed the total “guaranteed deduction”, then it puts nothing into their pockets.
Although it might be nice to increase the standard deduction for most farm families, it will not do as good as this headline suggests. We will keep you posted on the status of this bill.