WashingtonMeghan Freed, who practices family law in Hartford, said the massive tax overhaul surprised divorce attorneys and their clients by scrapping a 75-year-old tax deduction for alimony payments.

Ending the deductibility of alimony payments was proposed in the House tax bill, but not in the Senate’s version, so attorneys had to wait until a final bill was negotiated to determine what would happen to this deduction, which figures prominently in divorce negotiations.

So, for weeks before the end of the year, Freed said divorce attorneys were unsure of how to advise their clients on the fate of the alimony deduction, “which is a way to take the sting” out of those payments.

Washington – With the clock ticking toward a government shutdown, the U.S. House and Senate on Thursday approved a short-term spending bill that may give temporary relief to thousands of Connecticut families who have been notified that health coverage for their children will soon end.

In a largely partisan vote, the House voted 231-188 for a continuing resolution, or CR, that would fund most federal agencies at last year’s levels until Jan. 19. It also would provide about $5 billion to bolster the nation’s missile defense programs and repair the U.S.S. John S. McCain and the U.S.S. Fitzgerald, which were damaged in collisions last summer.

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Andrew Lattimer, a certified public accountant and partner at BlumShapiro.

 

As a historic overhaul of the nation’s tax code nears the finish line, Connecticut taxpayers have deluged their accountants with questions over its impact on their households or businesses.

“As a tax practitioner I’m kind of excited to see this happen, but at the same point there’s a lot of anxiety out there as well,” said Andrew Lattimer, a certified public accountant and tax specialist at the West Hartford office of BlumShapiro.

There hasn’t been such an ambitious attempt to change the federal tax system since 1986, when former President Ronald Reagan cut taxes to promote corporate growth and shrink the size of government. That “supply side” economic theory resulted in huge deficits.

Reaganomics has been revived in the new tax plan. It’s GOP authors (no Democrat on Capitol Hill supports the plan) say cutting corporate taxes will stimulate growth and bring back jobs that were lost as American companies decided they would pay lower taxes if they located their business overseas.

The 560-page tax plan lowers the corporate tax rate, now as high as 35 percent, to 21 percent. It also lowers individual rates and increases the child tax credit. But the $4,050 exemption every member of a family can claim will be gone.

 

Washington – As House and Senate negotiators of a final tax bill worked to finish the plan Thursday, changes were made that could help Connecticut homeowners and students.

In reconciling differing House and Senate tax bills, GOP leaders agreed to allow homeowners to deduct up to $10,000 in state income tax or local property taxes or a combination of both.

The original House and Senate bills ended the deductibility of taxes paid to state and local governments and capped the property tax deduction at $10,000.

The final bill also would cap the deductibility of interest on new mortgages to those of $750,000, a higher cap than the $500,000 limit in the House-passed bill but lower than the $1 million limit that currently exists.

The elimination and curtailment of these deductions impacts taxpayers in high cost-of-living states like Connecticut more than taxpayers in states where state and property taxes and the cost of homes are lower.

Those living in lower-cost states are likely to benefit more from the tax plan’s near doubling of the standard deduction to $12,000 for individuals and $24,000 for married couples.

The changes in the deductibility of state and local taxes, property taxes and home mortgage interest were made at the insistence of California and New York Republicans, who were concerned about the impact on their constituents of the elimination of the state and local (SALT) deduction, the cap on the deductibility of property taxes and the cap on the deductibility of interest on large mortgages.

taxRep. Darrell Issa, R-Calif., wrote House and Senate leaders earlier this week that “done correctly, tax reform has the potential to restore America’s global competitiveness, generate widespread economic opportunity, unleash untold levels of job creation, and allow families to keep even more of their hard-earned paychecks.”

“Done poorly, a tax bill would pick winners and losers, and unnecessarily punish some taxpayers to the benefit of others,” Issa wrote. “As it’s written today, I fear the bill looks more like the latter than the former.”

Details of the final plan began leaking to reporters late Wednesday. GOP leaders plan to release the final agreement on Friday, and vote on it in the House and Senate early next week.

The final tax plan will allow taxpayers to continue to deduct high out-of-pocket medical expenses, a deduction that had been eliminated in the House bill.

It also will allow graduate students who receive tuition waivers to avoid paying taxes on that benefit. It also restores the deductibility of interest paid on student loans.

The final bill also keeps federal bonds that school systems use to finance construction interest free.

The final bill will keep a new 1.4 percent excise tax on the endowment of a handful of private colleges and universities, including Yale, but it is unclear what the threshold will be. The House plan called for taxing endowments worth at least $250,000 per full-time student, while the Senate doubled the cap.

Negotiators agreed to lower the top tax rate for individuals and families to 37 percent.

Their agreement would cut the top corporate tax rate to 21 percent, which is much lower than the current 35 percent rate but higher than the 20 percent initially sought by GOP leaders.

No Democrat in the House or Senate is expected to vote for the final tax overhaul, which means the GOP cannot lose more than two votes in the Senate.

Democrats say the tax bill is a giveaway to the rich at the expense of working Americans and dispute GOP arguments that it will spur enough new economic activity to make up for the $1.5 trillion it would otherwise add to the deficit.

“The tax bill is a massive, unnecessary give-away to corporations which aren’t asking for it and people who want to hand millions tax-free to their children,” Rep. Jim Himes, D-4th District, recently tweeted.

Marijuana leafHARTFORD: Even as a mayor who wants to be Governor calls on the state to “oversee” a dysfunctional government, the  Hartford Court of Common Council voted unanimously in favor of a resolution to make Marijuana legal in the state.

The council is asking Hartord’s legislation delegation to support legalization and presumably to tax Marijuana sales.

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HARTFORD: Connecticut is hoping to bring in $85 million with a “voluntary” tax compliance program, Fresh Start for both individuals and business.

“Not only will this program help individuals and businesses get back on track on their tax payments, but it will bring significant revenue back to our state, without raising taxes,” Governor Dannell Malloy said. “This revenue will be especially helpful during this time of budgetary constraint, under which our state has learned to do more with less. I strongly urge all filers that are behind on their payments to take this opportunity to make a fresh start.”

Commissioner Kevin Sullivan said. “The Governor and the legislature created the Fresh Start program to work with taxpayers.”

Once a CT Fresh Start application is accepted, DRS will waive penalties and significantly reduce the interest (50 percent) owed. If requested before applying, DRS may agree to a limited “look back” period.

To participate, taxpayers must complete the online application on the DRS website or at www.makeafreshstartct.com. Questions on the CT Fresh Start program can be directed to DRS by calling 1-877-729-6691.