TAX TIPS (and other stuff)
By Kelly J. Bullis, CPA
2022-September 28th
The One Big Beautiful Bill Act or OBBBA for short, (in the accounting world we call it the “O-Tripple B-A”) had a lot of exciting changes that will benefit many taxpayers, especially those on the lower spectrum of taxable income.
Well here are a few of the negative, not so popular parts of the OBBBA.
First, Suspended Deductions such as Miscellaneous Expenses, Casualty and Theft losses (except for disaster area losses), Mortgage Interest paid on home equity debt up to $100,000, Job-related Moving Expenses. All of these were temporarily disallowed from 2018-2025. Well, the OBBBA made the disallowance permanent. It also made the maximum Home Mortgage interest deduction limited to mortgages up to $750,000. NOTE: This change mostly hurts the “rich”.
Second, a new limit on the deduction of charitable contributions, if you itemize. In the past you were allowed to deduct the full amount of your charitable contributions. The old “O-Triple B-A” now limits actual charity deductions to the actual amount paid, minus a reduction of 0.5% of your adjusted gross income (AGI). Example, your AGI is $100,000, you gave $10,000, your deduction is $9,500 (10,000 minus 100,000 x .005). NOTE: This change mostly hurts the “rich”.
Third, prior to 2018, high-income taxpayers had to reduce their itemized deductions by 3% for every dollar of taxable income above an annual threshold. The maximum reduction was 80%. Since 2018, this rule was suspended until the end of 2025. Starting in 2026, this is back. NOTE: This change does just hurt the “rich”. (Who said the OBBBA benefited the “rich”? I think the “rich” feel like they just got it stuck to them with the OBBBA.)
Fourth, Home Energy credits (made up of a “Energy Efficient Home Improvement credit” giving
30% for qualified expense like insulation, central air conditioners, water heaters, furnaces, heat pumps and home energy audits, as well as a 30% “Residential Clean Energy credit” for the cost of new qualified clean energy property like solar electric panels, solar water heaters, wind turbines, geothermal heat pumps, fuel cells and battery storage technology) are repealed, effective 2026. Not so bad since Congress historically creates temporary credits like this to stimulate growth in a new idea they think benefits society as a whole. Getting energy efficient improvements to your home saves you money directly through energy bill savings, and that industry doesn’t need a government handout to spur it on any longer.
Fifth, Gambling losses are now limited to 90% of winnings. (Prior to the old O-Tripple B-A, gamblers, if they itemized their deductions, were allowed to deduct gambling losses up to 100% of their winnings. Ouch! If you won $1 million and lost $1.2 million (I had a client that had this happen), now you would only get to deduct $900,000, paying tax on $100,000 of earnings that you never got to keep! Bummer!
Have you heard? 1 Samuel 8:9 says, “Now then, obey their voice; only you shall solemnly warn them and show them the ways of the king who shall reign over them.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.
