Big Changes To The Tax Code: How Will It Impact Investing?
This blog post originally appeared on Luca Fury's website.
Watching the House and Senate pass their tax reform bill may have filled you with either joy or dread depending upon which side of the political spectrum you tend to align with. Regardless of your emotions, it definitely is worth noting what kind of impacts we can all expect from this particular piece of legislation.
There are sure to be some impacts to investing, so it is a good idea to have some knowledge of how the process is going to work from here on out. With that in mind, let us evaluate the ways in which investing activities will be affected in the coming year.
Lower Individual Rates
The first thing you might notice is that you have a little more money in your pocket to put into the market in the first place. This is because the individual tax rates were cut across the board. Some can argue that those at the top of the earnings pyramid got the largest cut, but the reality is that everyone is getting a reduction in how much they have to pay. You can use those savings to put a little more money into the market if you choose.
Greater Ability To Save For College
A university education is just about the best thing that a person can invest in for themselves or their family members. It is also something that is addressed in a big way in the tax reform bill. Specifically, the 529 savings plan that many people use to help send their children to college has been tweaked in the new reform bill. However, these changes are rather beneficial, as they may make it easier for parents to save for their children.
One specific provision allows parents to name an unborn child as the beneficiary of the savings plan. This means that they can literally start to save nine months earlier than what they were allowed to in the past. It may not sound like much, but every day counts when it comes to investing in something long-term like a college education.
Corporations Get A Break Too
Many of the corporations that people invest in through the stock market are getting a tax break as well. The top corporate tax rate has been slashed from 35% all the way down to 21%. That is sure to help the bottom line of plenty of corporations, and that in turn may translate to better stock market returns in general.