If you are among those applauding The Tax Cuts and Jobs Act (TCJA), you might want to go back and read the fine print. Many of the provisions of this act are going to send consumers deeper into debt. With increased debt burdens will come more hardship cases. This, in turn, means the debt relief business is positioned to benefit from 2018 Tax Reform.
Here’s why…
SALT Deductions Capped at $10,000
TCJA caps state and local tax (SALT) deductions at $10,000. This restriction on deductions for state and local income, sales and property taxes will make tax bills higher for many people. Higher tax bills will increase the possibility of default, which in turn will lead people to seeking debt negotiation services to get out from under financial burdens.
Mortgage Interest Deduction Decreased
There was a time when buying any type of home garnered a rather healthy tax incentive. At a time when home prices are escalating pretty much all over the country, TCJA now limits the deduction you can take to the interest on the first $750,000 of the loan. Further, certain types of home equity line of credit interest are no longer deductible.
Medical Expenses Will Drive More Personal Loans
One of the riders attached to the act did away with the Affordable Care Act’s tax incentive to maintain health insurance. This means individuals no longer have a financial enticement to acquire medical coverage.
When underinsured persons encounter unexpected medical expenses, they frequently turn to credit cards and personal loans to cover them. In most cases, they have to pursue these avenues because they are not in a financial position to have saved enough money to deal with such a circumstance. Taking on this additional debt has the potential to push them into financial trouble, which could mean seeking some relief through a debt settlement program.
Itemized Deductions Eliminated
Though billed as a method for simplifying tax preparation, this also has the effect of raising tax bills for those who previously claimed a number of itemized deductions. Higher tax bills mean more people will be unable to pay, which will force them into payment plans with the IRS.
If it comes down to choosing between paying the IRS and their credit card company, most people will choose the IRS. This will lead to more defaults on unsecured debt, expanding the need for debt negotiation services.
Ultimately, taking money out of the pockets of consumers they could have put toward resolving debts pushes them closer to experiencing financial hardships. This could lead to needing the services of a company like Freedom Debt Relief. For those wondering what Freedom Debt Relief is, thousands of Americans have enrolled in its programs to resolve debts more quickly and affordably than with other options.
While the debt relief business is positioned to increase from TCJA the prognosis for consumers who are already struggling financially is going to be quite a bit less than rosy.
