When it raises your tax bill!!
Recently, the NC General Assembly passed House Bill 998, the most significant overhaul of NC tax law in a generation, claiming they have lowered your taxes. This bill was co-sponsored by Senator Bob Rucho, a Mecklenburg County representative. However a closer look reveals that for many NC residents, especially the small business owner, and the retired, this is actually a tax hike.
While the rate of tax is lowered to 5.8% (allowing them to say, “We lowered your taxes”) under this new law, many tax deductions are eliminated, and new taxes are created which allows them to INCREASE tax revenue. Of greatest concern to NC business owners is the small business tax exemption that allowed the first $50,000 in tax to be exempt from NC taxes. For a small business owner with $50,000 in profit, this saved him or her about $3,000, a much needed break for the over-taxed business owner/employeer/entrepreneur. Now, this deduction, and many others are gone, causing the business owners State tax liability to actually INCREASE. Yup, this tax decrease may actually be an increase, unless you are a highly compensated employee, then you may save thousands.
Other deductions/tax credits that are eliminated-
Retirement income, unreimbursed job expenses, and 529 plan contributions, repeal of tax credits for child-care expenses, non-itemized charitable expenses and education expenses.
Taxes that are being increased or new taxes-
New tax on movie tickets, sporting events, concerts, plays, museums, newspapers, college meal plans, and certain service contracts.
Who will pay more tax?
Senior citizens on retirement income and small business owners will pay more under these new laws.
Who will break even?
A married couple making just $20,000 with two kids will break even.
Who will pay less tax?
A married couple making $40,000 will see a slight decrease, while a single taxpayer making $250,000 will see a tax savings of about $4,000.
Look out for the federal government to be using the same tactics to increase revenue by eliminating tax deductions so they can make similar claims!