They Did It! Tax Cuts and Jobs Act Has Passed

The House of Representatives passed the Tax Cuts and Jobs Act a second time Wednesday morning. The tax legislation will now go to President Donald Trump for his expected signature.

The House re-vote was necessary because the Senate version of the bill changed to meet the Byrd rule (named for former Sen. Robert Byrd), which prohibits the Senate from passing legislation using the budget reconciliation rules if the legislation contains extraneous provisions.

The provisions that were changed by the Senate and agreed to today by the House include:

  • Eliminating the use of Section 529 tuition savings funds for home schooling expenses. The law retains the use of up to $10,000 annually to be used to pay for tuition for the enrollment or attendance at an elementary or secondary public, private, or religious school.
  • Removing the exception to the endowment excise tax for private colleges and universities that have at least 500 tuition paying students during the preceding tax year. The law now exempts schools with less than 500 students. Under this provision, certain private colleges and universities will be subject to a 1.4% tax on their net investment income.

Most of the provisions in the new law will be effective beginning in 2018 and will sunset or go back to the current law after 2025. The major provisions can be found here: Tax Cut and Jobs Act – New Tax Legislation May Pass Before Year End

With little time left in the year, there are many possible planning opportunities, including:

  • Accelerating personal and business deductions into 2017, and deferring income to 2018 if your tax rates are expected to be lower. Personal deductions to accelerate may include:
    • State and local income taxes
    • Real estate taxes
    • Charitable contributions
    • Investment management fees
    • Tax return preparation fees (Yes, I said that!)
  • Evaluating capital investments closely. For some investments, deferring may be more beneficial. For others, especially if the investment is financed, it may be better to accelerate.
  • Deferring exercising stock options until 2018.

Every individual and business is different, and planning requires understanding your personal situation. The impact of the Alternative Minimum Tax is critical to consider when planning whether or not to accelerate deductions. It is often difficult to generalize.

Please contact us to discuss your possibilities.

This is an HBK Tax Advisory Group publication.
About the Author(s)

Jim is a Principal in the Tax Advisory Group in the Youngstown, Ohio office of HBK CPAs & Consultants and has been with the firm since 1986.

He has extensive experience in personal and estate planning, charitable planning, tax-exempt organizations and individual tax and financial planning. Jim earned a Bachelor of Science degree in Business Administration for the University of Toledo and the Personal Financial Specialist (PFS) designation, which is awarded by the American Institute of Certified Public Accountants to recognize CPAs who provide financial planning service. Jim also has experience in tax policies, procedures and resources, which HBK uses in their tax practices. He provides counsel to high-net worth individuals throughout HBK. He is one of the firm’s preeminent presenters and specializes in addressing business owners and individuals on topics such as the Affordable Care Act, Shale energy planning, charitable giving opportunities, estate and gift planning and exempt organization issues.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.