White House to begin tax reform push next week

WASHINGTON, Aug 25 (Reuters) - U.S. President Donald Trump will begin a major push next week to convince the public of the need for tax reform, shifting his focus to fiscal policy in an effort to win a big legislative victory by the end of the year, The Financial Times reported on Friday.

Trump would begin the effort next Wednesday with a speech in Missouri, the first in a series of addresses to generate public support on the issue, Gary Cohn, director of the National Economic Council, told the newspaper.

"We are completely engaged in tax reform," Cohn told the FT in an interview. "Starting next week the president's agenda and calendar is going to revolve around tax reform. He will start being on the road making major addresses justifying the reasoning for tax reform."

RELATED: Members past and present of Trump's inner circle

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Members past and present of President Trump's inner circle
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Members past and present of President Trump's inner circle
Michael Flynn: Former National Security Advisor, no longer with the Trump administration
Ivanka Trump: First daughter and presidential adviser
Gen. John Kelly: Former Secretary of Homeland Security, current White House chief of staff
Steve Bannon: Former White House chief strategist, no longer with the Trump administration
Jared Kushner: Son-in-law and senior adviser
Kellyanne Conway: Former Trump campaign manager, current counselor to the president
Reince Priebus: Former White House chief of staff, no longer with the Trump administration
Anthony Scaramucci: Former White House communications director, no longer with the Trump administration
Sarah Huckabee Sanders: White House press secretary
Donald Trump Jr.: First son to President Trump
Sean Spicer: Former White House press secretary, soon to be no longer with the Trump administration
Jeff Sessions: U.S. attorney general
Steve Mnuchin: Secretary of Treasury
Paul Manafort: Former Trump campaign chairman
Carter Page: Former foreign policy adviser to Trump's presidential campaign
Omarosa Manigault: Former Director of communications for the Office of Public Liaison
Melania Trump: Wife to President Trump and first lady of the United States
Jason Miller: Former White House communications director, no longer with the Trump administration
Hope Hicks: White House Director of Strategic Communications
Mike Dubke: Former White House communications director, no longer with the Trump administration
Stephen Miller: Trump senior policy adviser
Corey Lewandowski: Former Trump campaign manager
Eric Trump: Son to President Trump
Rex Tillerson: Secretary of State
Sebastian Gorka: Former deputy assistant to the president in the Trump administration, no longer in his White House role
Roger Stone: Former Trump campaign adviser, current host of Stone Cold Truth
Betsy DeVos: U.S. Education Secretary
Gary Cohn, director of the U.S. National Economic Council, walks toward Marine One on the South Lawn of the White House in Washington, D.C., U.S., on Wednesday, July 5, 2017. President Donald Trump's encounter this week at the Group of 20 summit with Russian leader Vladimir Putin is raising concerns among veteran American diplomats and analysts about a mismatch between a U.S. president new to global affairs and a wily former Soviet spymaster. Photographer: Andrew Harrer/Bloomberg via Getty Images
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Although Cohn stressed that tax reform would be front and center of Trump's agenda, the Republican-controlled Congress faces two other pressing issues when it returns from its August recess on Sept. 5.

Lawmakers need to approve an increase in the U.S. debt ceiling to allow the federal government to keep borrowing money and paying its bills, including its debt obliterations. Separately they need to pass at least stop-gap spending measures to keep the government operating. Deadlines on both issues will loom within weeks after lawmakers return from their break.

Asked by the FT whether the debate over the debt ceiling could derail the tax reform drive, Cohn said that "at the end of the day, Congress has to increase the debt ceiling - that is just the reality." He added that this would be in September, before tax reform legislation.

"The key point is this: tax reform is the White House's number one focus right now," he added.

Cohn said White House officials had been working with Senate Majority Leader Mitch McConnell, House of Representatives Speaker Paul Ryan and other leading congressional Republicans on "an outline and skeleton" for the tax reform proposal, "and we have a good skeleton that we have agreed to."

The details Cohn discussed were similar to those mentioned by Ryan at a meeting with Boeing employees on Thursday.

Asked whether the focus on tax reform had been complicated by Twitter attacks by the Republican president on McConnell and Ryan, Cohn said the White House officials worked well with the two "and we have made a massive amount of progress" on taxes.

Cohn said the House Ways and Means Committee would put more "flesh and bone" on the tax reform plan when lawmakers return from the recess. He said he believed a bill could pass tax committees in both chambers and be passed by both the House and Senate by the end of 2017.

TAX DETAILS

In the case of individual taxpayers, Cohn said the president's reform plan would protect the three big deductions that people can claim on taxes: for home mortgages, charitable giving and retirement savings.

Beyond that, it would increase the caps for the standard deduction while eliminating most other personal deductions, Cohn said. The plan also aims to get rid of taxes on estates left when people die.

Cohn said for businesses, the administration is proposing to lower corporate tax rates, while eliminating many of the deductions that businesses use to reduce the amount of tax they must pay.

RELATED: The most-overlooked tax deductions:

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The Most-Overlooked Tax Deductions
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The Most-Overlooked Tax Deductions
This is an especially dangerous issue for 2012 returns because, throughout 2012, this tax deduction simply didn't exist. The right for taxpayers to deduct state sales taxes paid expired at the end of 2011. Everyone expected Congress to revive the tax break sometime during 2012, but the issue got tangled up in fiscal cliff negotiations. Finally, in the bill approved Jan. 1, 2013, the deduction was restored ... retroactively for 2012 and for 2013 returns that will be filed next year.

This is particularly important to you if you live in a state that does not impose a state income tax. You see, Congress offers you the choice between deducting state income taxes paid or state sales taxes paid. You choose whichever gives you the largest deduction, of course, and if your state doesn't have an income tax, the sales tax write-off is clearly the way to go.

In some cases, even filers who pay state income taxes can come out ahead with the sales tax choice. The IRS has tables that show how much residents of various states can deduct, based on their income and state and local sales tax rates. But the tables aren't the last word. If you purchased a vehicle, boat or airplane, you may add the sales tax you paid on that big-ticket item to the amount shown in the IRS table for your state.

The same goes for any homebuilding materials you purchased. These add-on items are easy to overlook, but could make the sales-tax deduction a better deal even if you live in a state with an income tax. The IRS has a calculator on its website to help you figure the deduction.

This isn't really a tax deduction, but it is an important subtraction that can save you a bundle. And this is the break that former IRS commissioner Fred Goldberg told Kiplinger's that a lot of taxpayers miss.

If, like most investors, your mutual fund dividends are automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include the reinvested dividends in your basis results in double taxation of the dividends -- once when they were paid out and immediately reinvested in more shares and later when they're included in the proceeds of the sale. Don't make that costly mistake.

If you're not sure what your basis is, ask the fund for help. (Starting with sales in 2012, mutual funds must report to investors -- and the IRS -- the tax basis of shares redeemed during the year. But note this: The new rule applies only to shares purchased in 2012 and later years. If you redeemed shares you purchased prior to 2012, it's still up to you to figure your basis. Don't forget those reinvested dividends!)

If you're among the millions of unemployed Americans who were looking for a job in 2012, we hope you kept track of your job-search expenses ... or can reconstruct them. If you're looking for a position in the same line of work, you can deduct job-hunting costs as miscellaneous expenses if you itemize. Qualifying expenses can be written off even if you didn't land a new job. In any case, such expenses can be deducted only to the extent that your total miscellaneous expenses exceed 2% of your adjusted gross income. Job-hunting expenses incurred while looking for your first job don't qualify. Deductible job-search costs include, but aren't limited to:

  • Transportation expenses incurred as part of the job search, including 55.5 cents a mile for driving your own car plus parking and tolls
  • Food and lodging expenses if your search takes you away from home overnight
  • Cab fares
  • Employment agency fees
  • Costs of printing resumes, business cards, postage, and advertising

Although job-hunting expenses are not deductible when looking for your first job, moving expenses to get to that job are. And you get this write-off even if you don't itemize.

To qualify for the deduction, your first job must be at least 50 miles away from your old home. If you qualify, you can deduct the cost of getting yourself and your household goods to the new area. If you drove your own car on a 2012 move, deduct 23 cents a mile, plus what you paid for parking and tolls.

Members of the National Guard or the military reserves may tap a deduction for travel expenses to drills or meetings. To qualify, you must travel more than 100 miles from home and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills. For 2012 travel, the rate is 55.5 cents a mile, plus what you paid for parking fees and tolls.
Folks who continue to run their own businesses after qualifying for Medicare can deduct the premiums they pay for Medicare Part B and Medicare Part D and the cost of supplemental Medicare (medigap) policies. This deduction is available whether or not you itemize and is not subject the 7.5% of AGI test that applies to itemized medical expenses. One caveat: You can't claim this deduction if you are eligible to be covered under an employer-subsidized health plan offered by your employer (if you have a job as well as your business) or your spouse's employer if he or she has a job that offers family medical coverage.

A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that's subject to tax. In the 25% bracket, each dollar of deductions is worth a quarter; each dollar of credits is worth a greenback.

You can qualify for a tax credit worth between 20% and 35% of what you pay for child care while you work. But if your boss offers a child care reimbursement account -- which allows you to pay for the child care with pre-tax dollars -- that might be an even better deal. If you qualify for a 20% credit but are in the 25% tax bracket, for example, the reimbursement plan is the way to go. (In any case, only amounts paid for the care of children under age 13 count.)
You can't double dip. Expenses paid through a plan can't also be used to generate the tax credit. But get this: Although only $5,000 in expenses can be paid through a tax-favored reimbursement account, up to $6,000 for the care of two or more children can qualify for the credit. So, if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 of additional expenses. That would cut your tax bill by at least $200.

This sounds complicated, but it can save you a lot of money if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax.

Basically, you get an income-tax deduction for the amount of estate tax paid on the IRA assets you received. Let's say you inherited a $100,000 IRA, and the fact that the money was included in your benefactor's estate added $35,000 to the estate-tax bill. You get to deduct that $35,000 on your tax returns as you withdraw the money from the IRA. If you withdraw $50,000 in one year, for example, you get to claim a $17,500 itemized deduction on Schedule A. That would save you $4,900 in the 28% bracket.

When you buy a house, you get to deduct in one fell swoop the points paid to get your mortgage. When you refinance, though, you have to deduct the points on the new loan over the life of that loan. That means you can deduct 1/30th of the points a year if it's a 30-year mortgage. That's $33 a year for each $1,000 of points you paid -- not much, maybe, but don't throw it away.

Even more important, in the year you pay off the loan -- because you sell the house or refinance again -- you get to deduct all as-yet-undeducted points. There's one exception to this sweet rule: If you refinance a refinanced loan with the same lender, you add the points paid on the latest deal to the leftovers from the previous refinancing -- and deduct that amount gradually over the life of the new loan. A pain? Yes, but at least you'll be compensated for the hassle.

Many employers continue to pay employees' full salary while they serve on jury duty, but some impose a quid pro quo: The employees have to turn over their jury pay to the company coffers. The only problem is that the IRS demands that you report those jury fees as taxable income. To even things out, you get to deduct the amount you give to your employer.

But how do you do it? There's no line on the Form 1040 labeled jury fees. Instead the write-off goes on line 36, which purports to be for simply totaling up deductions that get their own lines. Add your jury fees to the total of your other write-offs and write "jury pay" on the dotted line to the left.

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Asked whether the corporate tax rate could be cut to 15 percent as previously suggested by Trump, Cohn said, "I would like to get the tax rate as low as possible so that businesses want to create jobs here."

He said the administration would propose going to a system where American companies would not have to pay additional tax when they bring profits earned overseas back to the United States.

"Today, they often have to pay extra taxes for bringing profits back to the U.S.," Cohn said. "Our current system basically creates a penalty for headquartering in the U.S."

He said the administration did envision a one-time low tax rate on all overseas profits.

(Reporting by David Alexander and Makini Brice; Editing by Jeffrey Benkoe and Frances Kerry)

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