When will we see tax bill’s benefits?

There’s no shortage of Republican optimism and Democratic pessimism about what is going to happen if, as all signs indicate, Congress sends President Trump a sweeping tax bill this week and he signs it before heading to Florida for Christmas.

Trump’s Council of Economic Advisers predicted the corporate tax changes would result in a $4,000 salary increase for the average worker.

Republicans on the House and Senate committees that wrote the bill said a family of four with a median family income of $73,000 would get a tax cut of $2,059, at least through the end of 2025.

If the bill is approved — the House is likely to vote on it Tuesday and the Senate on Wednesday — how soon will people see the results? Like the tax code itself, the answer is complicated.

Paychecks

Nearly all of the tax changes would take effect next year, which means the 2017 tax return most people file in April — as well as payments in January for those who pay taxes quarterly — would follow the current tax code.

But people may not have to wait until April 2019 to get a break if they’re due one.

Most employees have income taxes withheld from their paychecks, and payroll departments base the amount withheld from each check on Internal

Revenue Service tables that take into account annual salary and factors such as the number of children an employee has.

The IRS said new tables could be available as early as February, meaning people could see their take-home pay increase before the winter ends.

“We’ve been doing things like this for years,” said Pete Isberg, a vice president at ADP, which handles payroll for one of every six American workers. “It’s pretty routine to have a major tax bill get signed into law in late December.”

One potential glitch: The W-4 tax form that all employees sign telling their employers whether they are married and how many children they have appears to be invalidated by the bill because it eliminates the exemptions taxpayers get for themselves, their spouses and their children.

Another wrinkle to watch: Since the fiscal year began Oct. 1, Congress has funded the government with shortterm spending bills and needs to pass another one by Friday night to prevent a partial shutdown.

The IRS may need a budget increase to deal with the crush of new rules to implement the bill.

It is not clear when Congress could make that happen.

Medical expenses

The tax deduction for significant medical expenses was nearly eliminated, then lawmakers made it more generous in the final bill, and the change would be retroactive to the beginning of

2017. That means taxpayers who itemize would be able to deduct medical expenses incurred in 2017 that exceeded

7.5% of their incomes, instead of the

10% threshold in the current law. The 7.5% threshold would apply to

2018 but go back up to 10% after that.

Shareholders

Benefits of the tax bill have already been flowing to shareholders via stock prices as Wall Street anticipated the drop in the corporate tax rate from 35% to 21% by bidding up stock.

That benefits shareholders, including working people who own stocks through retirement funds. Business changes could lead to bigger dividends as companies decide how to use savings from a lower corporate rate.

What about those new jobs?

A preliminary analysis of the final bill by the Tax Foundation, a think tank whose studies were quoted often by Republicans, indicates the final package may produce far fewer jobs than earlier drafts would have. The foundation estimates 339,000 additional jobs created over the next 10 years, down from about

890,000 in the initial House bill and

925,000 in the initial Senate bill. The change is largely because most of the individual tax cuts would expire Dec. 31, 2025, which theoretically would slow any economic growth the cuts generated, said Nicole Kaeding, a foundation economist.

Businesses whose owners pay their taxes on personal rather than corporate returns would get a new benefit under the bill — a 20% deduction of their business income before tax is calculated — which could fuel job growth. But that tax break also would expire in 2025, limiting its potential job impact.

Things to consider before Jan. 1

If some deductions are eliminated and others cut back — most notably the deduction for state income and local property taxes — some taxpayers may face tax increases in 2018.

Paul Dougherty, an accountant with Eisner-Amper in New Jersey, suggests two ways to cushion the blow.

First, if you can, pay property taxes this year that are due next year.

Dougherty said people who think they will take the standard deduction next year but still want a benefit for future charitable contributions could put money into what is known as a “donor advised fund,” available through investment firms, and take the deduction on their 2017 return. Payments from the fund to designated charities could be made in future years.