The House passed legislation on December 17th that includes a tax cuts package and that is expected to be approved by the Senate and then signed by President Trump. The tax package includes extensions for dozens of expiring tax provisions, modifications to certain provisions of the Tax Cuts and Jobs Act (TCJA) passed in 2017, retirement savings incentives, tax relief for individuals and businesses located in Presidentially-declared disaster areas, and other changes. Here are some noteworthy changes included in the package:
Tax Extenders
The package generally provides extensions through December 31, 2020, sometimes retroactively, for a number of expired or expiring tax provisions, a few of which are:
- New markets credit
- Work opportunity credit
- Employer credit for paid family and medical leave
- Various energy-related deductions and credits
- Deduction of qualified tuition and related expenses
- 7.5% threshold for unreimbursed medical expenses (lowered from 10%)
Modifications to the TCJA
The changes to the TCJA include a retroactive repeal of the provision that increased unrelated business taxable income (UBTI) of tax exempt organizations that provide qualified parking and qualified transportation fringe benefits to employees, which should be welcome news to nonprofit organizations which owed income tax under the TCJA as a result of providing these employee benefits. Also included is a reversal of the changes made to the calculation of the so-called kiddie tax.
Retirement Savings
Also included is a retirement savings package that was approved by the House earlier this year and that includes the following changes, among others:
- Replacing the 5-year rule for required minimum distributions (RMDs) made to non-spouse beneficiaries with a 10-year period. This change, however, also significantly limits the use of so-called “stretch IRAs”
- Extending the RMD beginning date from age 70 ½ to age 72
- Removing the 70 ½ age limitation for making deductible traditional IRA contributions
This article highlights just some of the changes included in the new tax package that may be passed and signed into law in the coming days. Please contact us if you have questions about these or other changes and also click on the links below if you would like to read our recent year end tax planning letter for more tax saving ideas to consider before year end.
- Tax Planning for Individuals
- Tax Planning for Business Owners
- Tax Planning for Investors and Gift/Estate Planning
