On the top 2% not itemizing anymore...

[AngryAmish]

1. Does that include S corporations (or sole proprietors or LLC members) business expenses?

2. If 1. above, why not form corporation, sell them my house, pay rent, deduct mortgage cost as business deduction?

[frazzled]

1. He didn't say "not itemizing anymore"

He said there would be a cap on itemizations.

So, for example, if you have a $4 million dollar mortage, you might not be able to deduct the total interest on that mortgage, but only a portion of it. It's an excellent idea.

[AngryAmish]

2. that is an excellent idea

I thought that once you get above a certain % no more deductions period.

Mortgage interest should be capped, charitable giving should not be subject to a cap, tho.

[frazzled]

4. It's not really charitable if you only do it for the deduction

is it. (?)

I have sympathy for museums and other organizations and institutions who depend on million-dollar donations or paintings, for example, that would possibly not happen if the fat cats didn't get their deductions for it. They are almost compelled to give things away to shelter their income from taxes.

But it has also, for example, driven the price of such paintings up astronomically in the market. Museums used to be able to buy things themselves. Capping the deductions might bring those prices back down, and stop works from flooding into the hands of ignorant businessmen.

The truly charitable will continue to donate to charities and nonprofits. Those who are just doing it for the tax shelter ... I think we'd be better off without them.

[Travis_0004]

8. Lets say an indivuals tax rate is 35%

That means for every 1.00 you donate, you save 35 cents in taxes. You are still giving 65 cents that you otherwise could have kept, so I don't think people donate for the deduction. They would have had more money if they didn't make the donation, and instead just paid the taxes.

Although people will still donate, I can almost guarantee donations will go down. Some will donate the same amount, but I can imagine many people will donate less so they have money to pay that extra tax bill.

[frazzled]

10. We're talking top 2% of income earners

People making more than $250,000 --- but mostly far far far above that.

Let's say people give 10% of their income to charity. The person making $80,000 who gives away $8,000 can still deduct all of it. The person making $500,000 who gives away $50,000 can only deduct some of it (unknown yet what amount--but say it's 50% of it, i.e., $25,000).

[county worker]

3. Business expense deductions have to be "ordinary and customary"

You just can't deduct your house because you sold it to a corporation. If it is used in business 100% you can depreciate it over the life of the mortgage.

I doubt your house would be an "ordinary and customary" business expense.

[MedicalAdmin]

6. Companies also have to have a stated purpose and show a profit.

If they have neither than they are not a business, they are a hobby. Commonly you can only run in the red for 5 years running (filed, not actual) before the IRS flags you for revokation of your business license.

That's why you can't just sell your house to your company unless that is part of your business purpose and you can post a profit... I once thought of this and found out that others have as well. ...

[county worker]

9. That's why there are people who get paid to apply the tax code.

I use to do business tax returns and it is amazing the things people think they can deduct.

In this country there is the idea that business and rich people don't pay taxes and those who have that idea are rich and own businesses.

[MedicalAdmin]

11. I'm not rich but I own a business. Do I qualify ?

Bwahahahahaha. I LOOOOOOOOOOVVVVVEEEEE my accountant. She saves me $$$$ by simply making me follow the rules.

[dems_rightnow]

12. The IRS doesn't issue business licenses..

... or revoke them. They tell you what you can deduct.

[safeinOhio]

5. Can't they make

ALL income over a million taxed as "earned" income?

[Bluenorthwest]

7. He said 'limit itemized deductions for the top...'

Not no more. Limits. This is very good.