In 2017, Congress passed the Tax Cuts and Job Act, which has been beneficial on the corporate side of tax reform. On the individual side, Congress allowed politics to get in the way of real reform, and that is inexcusable. The most egregious example of this was the elimination the miscellaneous itemized deduction.
The miscellaneous itemized deduction was truly the only legitimate deduction in the Internal Revenue Code (IRC). Its inclusion was absolutely necessary to maintain the integrity of the tax code. This deduction allowed taxpayers the ability to write off expenses that were incurred as part of the process to earn the income they are taxed on! For instance, under prior tax law, a person who earned $100K in a business but had to pay $30K in legal fees to get it, would pay taxes on only the $70K net that was actually made during the process. With the new change now removing the miscellaneous itemized deduction, this person will have to pay taxes on the full $100K!
Simply put, if you can’t deduct miscellaneous itemized expenses, you wind up paying taxes on income that you actually didn’t earn. That is simply outrageous — and unfortunately, it is now the case as a result of last year’s tax reform. Allowing such deductions is truly the construct for fair tax law; everything else is merely subsidies, politics, picking winners and losers. Congress must act to restore this equitable provision and restore confidence to the taxpayers.