House Republicans Unveil Tax Reform 2.0 Package

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House Ways and Means Committee Chairman Kevin Brady released the framework for Tax Reform 2.0, House Republican's proposals for the next round of tax reform (Tax Alert #20), earlier this summer. This week, the committee released details of the proposal. They hope to bring three bills to a full chamber vote by the end of September. The Senate, where Democratic support would be needed to garner the necessary 60 votes, is not expected to take up the legislation this year.

 

The centerpiece of the three separate bills is the American Innovation Bill of 2018. It includes key changes to the individual income tax. Several temporary items in the Tax Cuts and Jobs Act slated to revert to prior law after 2025 would become permanent:

 

  • Individual tax rate changes
  • the $10,000 cap on state and local tax deductions, the $750,000 loan maximum on mortgage interest deductions, and the repeal of miscellaneous individual income tax deductions
  • the expanded standard deduction, the child tax credit, and the elimination of personal exemptions
  • the 20% deduction on income from passthrough businesses

 

In addition, the allowance of medical expense deductions above 7.5% of adjusted gross income, currently scheduled to return to 10% after this year, would be extended through 2020.

 

The American Innovation Bill of 2018 would allow new businesses to deduct the first $20,000 of start-up expenses (current law allows only $5,000). The amount would be reduced once expenses reach $120,000. Expenses that could not be deducted immediately would be amortized over 180 months.

 

The Family Savings Bill of 2018 would make a number of reforms to retirement savings as well as create Universal Savings Accounts. These "USA" accounts would allow individuals to contribute up to $2,500 of after-tax dollar per year, with no income limits for participation. Withdrawals (which could be made before retirement) would be tax free, including the income earned while held within the account.

 

TCJA made sweeping changes to tax law. Call your LM Cohen professional if you have questions about these latest proposals or other aspects of the law.

 

All of our prior Tax Cuts and Jobs Act Alerts are available for you to view on the Updates page of our website.

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