As a follow up to my prior blog post entitled “New Tax Legislation”, last Thursday, November 9, 2017, the House Ways and Means Committee voted along party lines (24-16) in favor of passing the amended Tax Reform Bill to the full House. Since its unveiling on November 2, 2017, however, the House Ways and Means Committee made several amendments to the original legislation. In addition, Senate Republicans released their own proposed legislation on tax reform. In this blog, we will take a look at the revisions to the House Bill, the new Senate Bill, and of course, some key differences between them.
Amendments from the House Ways and Means Committee
Adoption Tax Credit
While the Adoption Tax Credit was reinstated, it was not without some drama. While the Democrats proposed an amendment that would have restored the credit, Republicans voted it down. However, after pushback from religious conservatives, the Republicans ended up reinstating the credit. As a refresher, the initial proposal would have eliminated the Adoption Tax Credit that allows a credit of up to $13,750 per child for qualified adoption related expenses.
Flex Spending Accounts for Childcare
Another interesting reinstatement came after much outcry from constituents regarding the elimination of Flex Spending Accounts for Childcare. An amendment passed earlier in the week restored the accounts, which allows families to save up to $5,000 pre-tax for child care expenses. However, this restoration is limited to the next five years only.
Child Tax Credit
While the Child Tax Credit remains at its increased level of $1,600, up from $1,000, a valid Social Security number will now be required to receive it. Currently, a Child Tax Credit can be claimed with a Social Security Number (issued by the Social Security Administration) or with an Individual Taxpayer Identification Number (“ITIN” – issued by the IRS) for certain nonresident and resident aliens. In other words, an ITIN can be obtained regardless of immigration status, whereas a Social Security Number can only be issued to citizens, green-card holders, and other limited groups, such as refugees and people granted political asylum. The motivation behind this was to eliminate tax credits for illegal immigrants.
Medical Expense Deductions
Presently, individuals are allowed to deduct medical expenses (including long-term care insurance premiums) that exceed 10% of their adjusted gross income. (This floor was actually raised from 7.5% under the Affordable Care Act). The initial tax legislation eliminated this deduction, and even after much debate this week, that elimination remains in the final version from the Committee.