As we approach the end of 2019, we are monitoring several tax developments:Oct 2019
The IRS has expanded the list of medical expenses, including those related to an existing illness or preexisting condition, that can be paid for under a high deductible health plan. These plans are usually paired with a health savings account (HSA).
● Taxpayers with rental real estate may now qualify for a 20% rental income exclusion. Based on the safe harbor rule issued by the IRS in late September, if a taxpayer performed at least 250 hours of service for the rental property, the enterprise is considered as a trade or business. The range of services is quite broad but does not include hours spent as an investor, for instance, arranging financing and purchasing the property.
● You may notice that online purchases of goods and products are a bit more expensive in 2019 and beyond. As a result of the case involving online furniture retailer Wayfair, all states are now authorized to require that merchants collect sales tax on online sales.
● Many Democrats on the House Ways and Means Committee are lobbying to abolish the $10,000 limit on state and local taxes. This will be a very hard sell. Some states with high income and property taxes, such as New York and California, proposed creative ways to permit taxpayers to treat state payments as donations. To date, these and other proposals have not been successful.
Several tax priorities that Congress may address by year-end include:
● A number of tax extenders are about to expire at the end of 2019:
Certain energy and alternative vehicles credits
Exclusion from income for mortgage discharge from a principal residence
Deductions and credits for qualified educational expenses
● Continued suspension of taxes under the Affordable Care Act, including the 2.3% medical device excise tax and a fee on health insurance providers based on the provider’s market share.
● Senate action on the SECURE Act passed by the House to shore up retirement security, permit smaller employers to offer tax qualified retirement plans and address an unintended consequence in the Tax Cuts and Jobs Act (TCJA), by which children’s unearned income is taxed (“kiddie tax”) at the higher trust and estate rate rather than their parents’ marginal rate.
As the year draws to a close, please reach out to us with questions as to how the above issues may impact your personal or family tax situation. We have all heard Benjamin Franklin’s comment regarding death and taxes, but consider Will Roger’s opinion: “The only difference between death and taxes is that death doesn’t get worse every time Congress meets.”