Last Thursday, the House Ways and Means Committee passed Tax Reform 2.0. The package consisted of three bills (H.R. 6760, H.R. 6757, and H.R. 6756). All three of them are likely to be voted on next week before Congress adjourns to go home and campaign.
Here is a breakdown of these bills’ highlights and lowlights:
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H.R. 6760:
Highlights:
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Makes the tax rate reductions from last year’s tax reform permanent.
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Makes the expanded standard deduction and child tax credit permanent.
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Makes the new medical expenses deduction, which allows people to deduct medical expenses that are at least 7.5% of income, permanent. Previously medical expenses had to reach 10% of income before they could be deducted.
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Makes the new small business “pass-through deduction” section permanent.
(Note—Many provisions of last year’s tax reform bill were temporary because the bill was passed under reconciliation, which requires only a simple majority in the Senate. Reconciliation rules require any bill passed under that procedure to expire after ten years.)
Lowlights:
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Makes the $100,000 cap on state and local tax deduction (SALT) and the new mortgage deduction permanent. (I understand the arguments for capping SALT and I am sympathetic to them, but I object to “paying for” tax cuts with tax increases instead of spending cuts.)
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H.R. 6757
Highlights:
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Creates Universal Savings Accounts that individuals could contribute up to $2,500 tax free and use it for health, education or other expenses.
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Allows money in 529 education accounts to be used for apprenticeship and homeschooling expenses.
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Allows families to access retirement accounts penalty-free for expenses associated with birth or adoption.
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Allows small businesses to join together for 401(K) plans.
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Gives employers more time to put new retirement plans in place.
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Simplifies the rules for patrol patio needs in employee plans.
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Exempts small retirement accounts from mandatory payouts.
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Eliminates the age cap on IRA contributions.
3. H.R. 6756
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Allows businesses to deduct their start-up costs. Under the bill, Ford could deduct the lesser of their expenses or $20,000.
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