TAX LEGISLATION

Several bills have been proposed during 2019, but none of them have seen much advancement. Congress came close to passing the SECURE Act, which would have made changes to retirement savings and employer retirement contributions provisions, but that has stalled in the Senate. There has also been talk of a technical corrections bill, as well as Tax Reform 2.0, but given the divided Congress, as well as the current political climate, it is unlikely that there will be any progress on either bill before the end of 2019 or even in 2020.

Of most significance for year-end planning are the so-called tax extenders. This slate of more than 30 taxpayer-friendly provisions was last in effect for 2017. It includes a number of energy-related business credits, as well as the above-the-line deduction for tuition and fees, the treatment of mortgage insurance premiums as acquisition interest, and the exclusion of cancelation of indebtedness income on primary residences.

Although there is still significant Congressional support for these provisions, the political will is lacking. These provisions have not been extended to 2018 or 2019, and the longer the extenders are delayed, the less likely it is they will be enacted retroactively. However, that does not mean that they could not come back and be effective for future years. As such, if it is possible to delay tuition bills, or even a mortgage default, to 2020, there may be an advantage to doing so.

IMPACT. Extenders have been controversial for many years because of arguments over whether they really act to incentivize the actions they are meant to benefit if they can’t even be relied upon year-to-year. On the other hand, Congress regularly acted on them for decades. It has been only in the last four or five years that they extended them retroactively, so they could essentially be relied upon. Now, we see what happens when the extenders are ignored for several years. The best action by taxpayers is to not rely on the benefits of extenders and just treat them like a bonus for regular activity.