Tax policy can really shape our behavior, and the new tax plan is no exception. If taxes rise, you might feel less motivated to earn more because you’re taking home less money. This might sound like a bad thing, but it could actually lead to a happier, simpler life, focused less on earnings and more on freedom and quality time.
Back in 2012, I left my finance job not only because of the industry’s downturn but also due to a ridiculously high tax burden. Instead of moaning about it, I switched careers to become a writer, and I’ve never been happier.
However, for those of you who are motivated by keeping more of your earnings, here are three aspects of the new tax plan you need to watch out for, as they might just complicate your life:
1. 529 Plans: The new rules now allow you to use your 529 plan savings for private secondary education, not just college tuition. This might tempt you to spend on expensive private schooling. While this sounds good, high tuition fees can create unrealistic expectations and pressures for your children and could rob the joy of education from your family life.
2. High Earners in Costly Cities: If you’re a high earner living in places like San Francisco or New York, you’re probably not going to be thrilled with this plan. The cap on state and local tax deductions could increase your tax bills significantly, adding financial stress to your already busy, high-pressure life.
3. Estate Tax Changes: The new tax plan doubles the estate tax exemption. This might encourage you to aim for a higher net worth to avoid the 40% estate tax, pushing you to work harder and possibly take on more risk than you’re comfortable with.
Interestingly, the plan also raises the threshold for the Alternative Minimum Tax (AMT), which might not be enough to make you feel better about earning top-dollar incomes. The lure of higher earnings might lead you into an endless cycle of working harder for money that you might not actually need.
In summary, while the tax plan offers some breaks, it also presents traps that could lead to a less satisfying life if you’re not careful. It’s important to think about what truly brings happiness and fulfillment beyond just financial gains.
