On Wednesday, December 20, 2017, both houses of Congress passed new tax legislation. This comprehensive tax reform bill is more than 1,100 pages long, and has been called the biggest change to the American tax code in over 30 years. Depending on your political leanings and personal finances, you may or may not be happy about the new tax law and how it impacts you. However, regardless of what tax reform might mean for you as an individual, there’s one aspect of the bill that may affect all of us indirectly: the changes to rules related to itemized and standard deductions.
Itemized and Standard Deductions
From year to year, roughly 30% of American taxpayers opt to itemize their deductions. The reason is simple: itemizing allows them to claim a larger deduction than if they were to use the standard deduction. These itemizations have traditionally included things like interest paid on a mortgage, state or local taxes (including both income and sales tax), various property taxes, contributions to nonprofit organizations, and so on.
For many Americans, however, the new tax bill may mean that they no longer file a Schedule A form in order to itemize their deductions. Why? Because some itemized deductions are capped, and the standard deduction is increasing, the standard tax deduction may be more beneficial to those previously itemizing their deductions. In other words, they may find that itemized deductions would save them less than simply taking the standard deduction.
Changes to Itemized Deductions
A number of changes are being made to itemized deductions, including mortgage interest, medical expenses, and state and local tax deductions (or SALT deductions).
For new mortgages (that is, for mortgages taken out any time after December 15, 2017), only the interest on the first $750,000 of the mortgage will be deductible. Additionally, any interest paid on a home equity loan will no longer be deductible.
When it comes to medical expenses, taxpayers could previously deduct any expenses that exceeded 10% of the adjusted gross income. This amount has now been lowered to 7.5%. In terms of state and local tax deductions, the total amount of all combine SALT deductions is now limited to $10,000.
Standard Deductions Increased
Meanwhile, the amount of the standard deduction has been increased significantly. As of 2017, the standard deduction for a single individual was $6,350. For married couples filing jointly, this amount was $12,700. Once the new tax bill goes into effect, these amounts will nearly double. For single individuals, the standard deduction will be $12,000. For married couples filing jointly, the amount will increase to $24,000.
Junk Cars and the Environment
What does this have to do with junk cars and the environment? Every year, thousands of junk cars are donated to charity. This is a popular option amongst junk car owners, as donating their vehicle allows them to claim an itemized deduction in the form of a charitable contribution.
However, as a result of the new tax bill, fewer Americans will opt to itemize their deductions. This means that they won’t receive any financial benefit from donating their junk car, and there’s a greater likelihood that people will simply abandon their junk car somewhere rather than deal with it. Over time, an abandoned junk car begins to fall apart. As it does, its various chemicals and fluids can leach into the environment, contributing to both water and soil pollution.
There’s a way to avoid this, though: sell your junk car to a reputable junk car buyer. Rusty’s Auto Salvage will recycle your junk car. First, we’ll drain the fluids and dispose of them properly. Then, we’ll break the car down into its constituent scrap materials, and those materials will be recycled and repurposed for new products.
The new tax plan may change the way that people file their taxes, but it doesn’t have to result in an increase in the number of abandoned junk cars. If you’re not planning to donate your vehicle, contact a reputable junk car buyer like Rusty’s Auto Salvage and get cash for it today.
Article by Peter Greenblum, Rusty’s Auto Salvage