2017 Tax Reform First Pass

We have heard a lot about tax reform, but nothing is yet law.  We do now have an outline of what both the Senate and House think the new tax provisions should look like.  While there are differences, there are a lot of similarities and if both houses already agree, you can probably expect that to become law.

Here are the similarities:

  • Higher standard deduction
    Single $12,000
    Head of Household $18,000
    Married $24,000
  • No deduction for Home Equity Loan Interest
  • No more deduction for Personal Exemptions
  • Increase in Child Tax Credit (House wants $1,600, Senate wants $1,650)
  • No child credit without the child having a SSN
  • No credit for low income mortgage or plug-in electric vehicles
  • American Opportunity education credits limited to 5 years of college expenses.  No more life time learning or Hope Scholarship credit
    No more education expense deduction.
  • No new contributions to Coverdell Savings Accounts.  529 Plans would be the only option
  • 529 plan money can be used to pay for qualified elementary and high school expenses
  • No deduction for student loan interest
  • No exclusion for employer education assistance
  • No exclusion for qualified tuition reduction programs
  • No more Alternative Minimum Tax
  • No deduction for personal casualty loss, unless associated with a special disaster relief event.  That is probably a nationally declared disaster.
  • Charitable contributions limited to 60% of AGI up from 50%.
  • No deduction for moving expenses
  • No more Archer MSA exclusion.  HSA’s become the only tax preference plan for medical expenses.
  • No deduction for un-reimbursed employee business expenses
  • Home sale gain exclusion would require the taxpayer live in the home 5 out of the previous 8 years. Up from 2 of the previous 5 years.
  • Phase out of home sale gain exclusion for income over $250,000 for singles and $500,000 for married taxpayers.
  • No exclusion for dependent care assistance
  • No exclusion for reimbursed moving expense
  • No exclusion for adoption assistance programs
  • No longer allowed to re-character ROTH IRA to Traditional IRA
  • Employees who leave their employer will have until the due date of their return to repay any 401K loans or deposit an equivalent amount to an IRA.
  • Double the estate and gift tax exclusion to $10M

There are also proposed changes to taxation of businesses and we will cover those in an upcoming newsletter.

Remember none of this is law, yet, but expect any changes that are passed to be effective for the 2018 tax year.