All Quiet On The Tax Front: What’s Congress Up To On Taxes?
All Quiet On The Tax Front: What’s Congress Up To On Taxes?
Actually, not much has happened on the tax front after passing major tax reform in late 2017, although we are now starting to see proposals work their way through Congress. There are several reasons for this. Mainly, to allow time for the tax reform changes to settle in. Also, there was a turnover in House leadership after the mid-year election cycle which slowed things down..
What To Expect:
For the small business person there are two glaring items that deserve attention: fixing a technical glitch in bonus depreciation and addressing expired, or expiring, tax breaks.
There was a significant unintentional omission in the tax reform bill that removed bonus depreciation from enhancements to commercial buildings, retail improvements and restaurant property. Prior to reform these improvements were eligible for immediate write-off and were a major part of small business planning, both from the construction end as well as the retail end.
They were supposed to be included in the new law but omitted in error. Therefore, unaware small businesses (and preparers) were subject to an unexpected 2018 surprise.
As this item was already factored into the budgetary scoring process as a tax break, its correction would be seen as revenue neutral giving it a much better chance of passing through Congress, unlike other pro-business legislation such as permanent extension of some tax reform items. Nevertheless, it is important for small businesses that this tax-drafting error be corrected on both a go-forward and retroactive (back to 2018) basis.
- Should Congress restore bonus depreciation for qualified property enhancements? (Click Here to Voice Your Opinion)
Expired Extenders:
Lost in the aftermath of the 2017 tax reform bill, was the expiration of tax breaks that have yet to be restored or addressed. These include many energy related tax breaks for biofuels and renewable energy production, wind and solar, as well as expansion of several family-based tax credits for child and dependent care.
Currently, the tax writing arm of the House is working on extender legislation to address these issues. The Senate has appointed several bipartisan task-forces to separately study the various extenders.
- Should Congress reenact expired wind and solar tax credits or have they outlived their usefulness? (Click Here for Poll)
Individual State Income Tax Deduction:
Now that the filing season is over we have information on the impact of tax reform. Many of you came face-to-face with the $10,000 cap on state and local taxes that was part of tax reform. It was a shock to the system for some, especially those in high-tax states. For this reason, one of the most frequent questions we are receiving is whether Congress is considering doing something to relieve the pain.
There have been proposals to remove the $10,000 cap, but it comes with a proposed increase to the top individual tax rate. That’s a non-starter for Republicans and Democrats likely won’t consider a fix unless revenue enhancers are included. Another alternative on the table is to increase the ceiling above the $10,000 cap, but not remove it altogether. Why? This would index the cap and allow taxpayers to absorb a portion of potential future state and local tax increases.
- Should Congress leave alone, remove entirely or increase but not remove the tax cap on state and local taxes? (Click Here to Voice Your Opinion)
