Interpreting the GOP Tax Reform Plan -- Part 4
On Thursday, the House passed its own version of the tax reform bill, and the Senate will now take up the vote on its version of the bill, which differs in some ways with the House's package.
In the third article of this five-part series, we began discussing the individual provisions of the Ways and Means Committee Tax Reform Bill. In this article, we will conclude that discussion.
SEC. 1203. REFORMS TO DISCHARGE OF CERTAIN STUDENT LOAN INDEBTEDNESS
Any income resulting from the discharge of student debt on account of death or total disability of the student would be excluded from taxable income. The provision would exclude from income repayment of a taxpayer’s loans pursuant to the Indian Health Service Loan Repayment Program. The provision would be effective for discharges of indebtedness received after 2017 and amounts received in taxable years beginning after 2017.
SEC. 1204. REPEAL OF OTHER PROVISIONS RELATING TO EDUCATION
- The deduction for interest on educational loans and the deduction for qualified tuition and related expenses would be repealed.
- The exclusion for interest on United States savings bonds used to pay qualified higher education expenses ends.
- Exclusion for qualified tuition reduction programs are terminated.
- Exclusion for employer-provided education assistance programs would also be repealed.
SUBTITLE D – SIMPLIFICATION AND REFORM OF DEDUCTIONS
The specific provisions for which JCT reports aggregate revenue effect are as follows:
- Repeal of overall limitation on itemized deductions
- Mortgage interest
- Repeal of deduction for taxes not paid or accrued in a trade or business
- Repeal of deduction for personal casualty losses
- Repeal of deduction for state and local income taxes and sales taxes
- Allow a deduction only for personal casualty losses for those affected by hurricanes charitable contributions
- Repeal of deduction for tax preparation expenses
- Repeal of deduction for medical expenses
- Denial of deduction for expenses attributable to the trade or business of being an employee
SEC. 1302. MORTGAGE INTEREST
For debt incurred after the effective date of November 2, 2017, the $1 million limitation would be reduced to $500,000. Interest would be deductible only on a taxpayer’s principal residence. Similar to the current-law AMT rule, interest on home equity indebtedness incurred after the effective date would not be deductible. In the case of refinancing of debt incurred prior to November 2, 2017, the refinanced debt generally would be treated as incurred on the same date that the original debt was incurred for purposes of determining the limitation amount applicable to the refinanced debt. In the case of a taxpayer who enters into a written binding contract before November 2, 2017, the related debt would be treated as being incurred prior to November 2, 2017.
REPEALS OF DEDUCTIONS
- Personal casualty losses have been repealed.
- There is a limitation on wagering losses.
- Charitable contributions would be increased.
- Tax preparation fees would be eliminated.
- Medical expenses would be eliminated.
- Alimony payments would no longer be deductible, and no longer taxable to the recipient.
- Moving expenses would be repealed.
- The sale of a personal residence would be changed considerably.
In the final, and fifth, article of this series, I am going to give you my complete opinion of these changes.
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Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as...