Tax policy and rates have always been fluid, much more so than most people realize, as they only focus on it for short periods one time a year. You also don’t see many high school or college classes on the history of taxes and tax planning, unless you’re in accounting school.
Like a distant relative you see at an occasional wedding, you forget most of the prior experiences and conversations and simply repeat them as an act of convenience. It’s the lack of personal taxation understanding and the continuous ebbs and flows that allow the tax authorities to keep things the same just long enough to let people form habits, then change the tax rules to penalize the habits created. For example, people might say “I’m getting a home equity line of credit and the interest is tax deductible” with the majority of people and lenders talking about that as a benefit, then the rule change to double the standard deduction a few years ago left almost everyone NOT getting any tax benefit from the interest paid on their HELOC.
With the economy in shambles and a recession looming, the government will change tax policy again, and likely in a way where at least some old habits will become self destructive from a taxation point of view.
So, what’s the point? What can you do about it? More than ever, working with a tax planner now to create a flexible tax plan will be critical. The left lane runs with the herd (headed to the slaughter house in a hurry as they think they’re headed to a hay drop). The right lane will hang back and walk calmly away from the herd. Live long and happy on the range. Find a tax planner now!