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With all the focus on the Supreme Court recently, you might’ve missed the U.S. House passing Tax Reform 2.0. Passed on September 28, 2018, the legislation looks to make significant changes to the nation’s tax code. And as you likely recall, the U.S. tax code already experienced major changes via the Tax Cuts and Jobs Act of December 2017.
Tax Reform 2.0 would make the individual cuts of the Tax Cuts and Jobs Act permanent while also making changes to retirement savings.
To be fair, Tax Reform 2.0 is actually three unique bills. The shortest bill of the group, the American Innovation Act, would allow qualified new businesses to deduct as much as $20,000 in start-up costs the year in which they’re incurred.
The Protecting Family and Small Business Tax Cuts Act would make permanent the individual tax changes passed in December 2017. Most of those changes are set to expire after 2025. This Act would also extend the medical deduction threshold (7.5% of AGI) an additional two years to 2020.
But the third act, the Family Savings Act of 2018, may be the most interesting for retirement account holders. Notable changes as a result of this Act would include
- removing the age limit for Traditional IRA contributions (currently set at 70½);
- exempting account holders with a combined balance of less than $50,000 in IRAs, qualified plans, 403(b) plans and 457(b) plans from required minimum distributions (RMDs);
- enhancing the ability of employers to jointly participate in a common plan (known as a multiple employer plan, or MEP);
- deeming 403(b) custodial accounts to become IRAs with plan termination;
- creating a new excise tax exemption for expenses related to the birth or adoption of a child; and
- establishing a new post-tax Universal Savings Account, allowing $2,500 to be set aside for any purpose (not limited to retirement).
The difficulty in passage of the entirety of Tax Reform 2.0 comes in the U.S. Senate. Bipartisan support for all of Tax Reform 2.0 seems highly unlikely. However, some of the retirement savings-related items could end up passing the Senate. Another measure considered, called the Retirement Enhancement and Savings Act, contains many of the same retirement-related changes.
There is, therefore, a possibility we’ll see at least some of these proposed changes soon.
Kingdom Trust will continue to follow this legislation to see how it impacts our account holders and strategic relationships.
In order to take advantage of some of these potential changes, you must have an applicable retirement account. If you’re interested in opening an account with an industry leader in alternative asset investing, contact Kingdom Trust today!