The so-called "framework" for fixing the tax eliminates most itemized deductions (such as the deduction for state and local taxes), but it retains tax incentives for home mortgage interest and charitable contributions. At the same time, the framework increases the standard deduction to:
$24,000 for married taxpayers filing jointly, and $12,000 for single filers.
That means, those saving for or living in retirement and especially those who live in high state and local tax state who now itemize their deductions will have to crunch the numbers to see if they will pay more or less in taxes after factoring in their new marginal individual income tax bracket — 12%, 25% and 35%, and possibly a fourth higher rate on the highest-income household.
If you are paying more in taxes, you might consider moving to a more tax-friendly state.
"For retirees still one of the biggest areas of planning is determining which state they wish to live in," says Jonathan Gassman, the CEO and founder of The Gassman Financial Group. "So many Northerners from the East Coast tend to migrate to southern states such as Florida because the state does not impose a personal income tax and is not going to change under the Trump regime. Or for those living on the West Coast moving to Nevada which does not have an income tax. So, planning for which state to retire in still remains a big part of planning."
Bourdon says it's possible many retirees might stand to benefit from the higher standard deduction, and might not need to consider moving. "Under the proposed framework, if spouses have less than $24,000 in itemized deductions, they'd benefit from taking the standard deduction," Bourdon says. "Many pre-retirees and retirees don't have a home mortgage or have an old one which no longer provides much of an interest deduction. So, most retirees would not have sufficient charitable deductions to exceed the standard deduction and get a tax benefit from their donation."