As promised by House Ways and Means Committee Chairman Kevin Brady (R-TX) earlier this summer, a legislative framework for tax reform 2.0 was released on July 24th. The main focus of the framework, which contained numerous proposals, is assisting families and empowering entrepreneurs.
A two-page outline includes the following proposals, which will be considered by House Republicans in the fall:
- Permanent Tax Cuts: Tax Reform 2.0 aims to make individual tax provisions and Section 199A deduction introduced under the Tax Cuts and Jobs Act permanent, both of which are set to expire after 2025.
- Retirement: While light on specifics, the framework plans “a range of proposals” to help small businesses provide retirement plans to their employees.
- Universal Savings Accounts (USA): First proposed in The Universal Savings Account Act by Rep. Dave Brat (R-VA) in February 2017, a USA would provide individuals with the ability to contribute after-tax dollars where earnings grow tax-free. This account would operate similarly to a Roth IRA, but without any restrictions as to when or why the funds are withdrawn.
- Expanded Benefits of 529 Education Accounts: The Tax Cuts and Jobs Act expanded the use of 529 education accounts to include up to $10,000 per year for elementary and secondary school expenses. Tax Reform 2.0 would further expand the use of these tax-advantaged accounts by including apprenticeship fees, homeschooling, and paying off student debt as qualified expenses.
- Baby Savings: Did you know that the average cost of having a baby in the U.S. is $10,808? This new proposal would help reduce the financial burden that comes with having children, by giving expecting families access to funds from retirement accounts, penalty-free, while replenishing them in the future.
- Incentive to Innovate: Brand-new businesses and entrepreneurs will be allowed to write off more of their initial start-up costs. The framework also promises to “remove barriers to growth.”
What’s next? The Republican congressman will most likely use the framework in the listening sessions with their constituents during the August recess to gather support with the intent of taking action upon the return to Washington in September.
For more information about this potential new tax reform, please contact Anatoli Pilchtchikov or one of our tax advisors at 301.231.6200.