Highlights of the Final Tax Cuts and Jobs Act

Transcription

1 WEALTH SOLUTIONS GROUP Highlights f the Final Tax Cuts and Jbs Act The Huse and Senate have bth passed the cmbined tax refrm bill The cmbined tax refrm bill includes plans t lwer tax rates n individuals and businesses and change many deductins. Thse hping fr tax simplificatin, hwever, may be disappinted. Tim Steffen, CPA,CFP,CPWA Directr f Advanced Planning Baird Wealth Slutins Grup Updated December 21, 2017 After weeks f cmparing different tax refrm prpsals and debating hw t best meet varius gals, the Huse and Senate have bth passed the final versin f the cmbined bill that was released last week (this bill had been knwn as the Tax Cuts and Jbs Act, but its name was changed in the final vting prcess t meet parliamentary requirements). This versin f the bill mst clsely resembles the versin passed by the Senate earlier this mnth, and includes tax rate cuts fr individuals, crpratins and pass-thrugh businesses, an eliminatin f many frms f tax deductins, larger exemptins frm the estate tax and Alternative Minimum Tax (AMT), and numerus changes affecting multinatinal businesses. While steps were made t simplify ur federal tax system, this bill seems t fall shrt f where previus versins landed. Fr example, rather than repealing the estate tax and AMT, this bill simply expands the exemptins. Fewer taxpayers will be affected by them, but with AMT specifically, many will still have t g thrugh the calculatins t be sure. Several f the exemptins and deductins that were repealed in the riginal versins fund their way back int this latest versin. And mst imprtantly, mst f the changes affecting individual taxpayers are scheduled t expire after While the expectatin is that many f thse will eventually be permanently extended, it des set us up fr anther fiscal cliff-like shwdwn, similar t what ccurred at the end f President Trump is expected t sign this bill at any time, althugh that culd extend int January fr administrative reasn. The fllwing are highlights f many f the prvisins that will affect individuals and business wners. Fr the final language included in the bill, please visithttps:// 115hr1eas2.pdf. Unless specifically stated, all prvisins will take effect beginning in CHANGES TO INDIVIDUAL TAX RATES & BRACKETS The cmbined bill mstly adpts the Senate prpsal by sticking with 7 tax brackets but changing the rates and the incme levels t which they apply. One ntable change is that the tp rate will be lwered t 37% frm 39.6%. Page 1 f 9

2 Highlights f the Final Tax Cuts and Jbs Act, cntinued Married Filing Jint Single 2018 Taxable Incme New Old 2018 Taxable Incme New Old $0 19,050 10% 10% $0 9,525 10% 10% $19,050 77,400 12% 15% $9,525 38,700 12% 15% $77, ,150 22% $156, ,000 $165, ,950 24% $237, ,000 25% $38,700 82,500 22% $82,500 93,700 28% 24% $93, ,500 $157, ,450 $315, ,000 32% 33% $195, ,000 $400, ,950 $200, ,950 32% 25% 28% 33% $424, ,050 35% 35% $424, ,700 35% 35% $480, ,000 $426, , % $600, % $500, % 39.6% In general, marginal tax rates will fall at all levels. The exceptin is incme fr cuples between $400,000 and $424,950 (and singles between $200,000 and $424,950), where the marginal rate will increase frm 33% t 35% in This bill did nt include the bubble tax that was part f the Huse bill, which wuld have eliminated the benefit f the lwest brackets fr thse at high incme levels. Als, because the new tax brackets fr married cuples are in mst cases twice that f a single persn, this marks a significant reductin f the marriage penalty. Tw single individuals wh make the same incme wuld pay the same ttal tax individually as they wuld if they were married until their individual incmes reach $300,000. At that pint, they wuld begin paying mre tax as a married cuple than as tw single individuals. Fr 2017, that increase in tax begins nce their individual incmes reach rughly $77,000. These changes t the rdinary brackets resulted in a change t the 2018 brackets fr the three different capital gain rates: Capital Gain Tax Rate Lng Term Capital Gain/ Qualified Dividend Incme Married Filing Jint Single 0% $0 77,200 $0 38,600 15% $77, ,000 $38, ,800 20% $479,000 + $425,800 All f these changes t rdinary and capital gain tax brackets and rates expire after 2025 and revert back t the laws in effect fr CHANGES TO DEDUCTIONS Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 2 f 9

3 Highlights f the Final Tax Cuts and Jbs Act, cntinued This bill will repeal the persnal exemptin, the $4,050 deductin allwed fr each taxpayer and their dependents in It will als increase the standard deductin, as shwn in the table belw Filing Status 2018 Standard Deductin, Old Law 2018 Standard Deductin, New Law Married Filing Jint $13,000 $24,000 Married Filing Separate $6,500 $12,000 Single $6,500 $12,000 Head f Husehld $9,550 $18,000 The eliminatin f the persnal exemptin and the increased standard deductin are permanent changes. The Huse prpsal wuld have eliminated the additinal standard deductin fr thse ver age 65 r wh are blind. That was nt included in this cmbined bill, s thse increases t the standard deductin will remain in place. After much back and frth, the tax treatment f varius deductible expenses will temprarily change as fllws: The itemized deductin fr state and lcal taxes will be capped at a ttal f $10,000. The limit will apply t the cmbined amunt f incme and prperty taxes paid during the year. Hwever, any prperty r sales taxes paid in cnnectin with a business (such as a sle prprietrship, rental prperty r farm) will remain fully deductible against incme frm that business. Prperty taxes paid n freign real estate will n lnger be deductible. At ne pint this entire deductin was expected t be eliminated, but this $10,000 limit was a cncessin t taxpayers wh live in high-tax states. Taxpayers wh anticipate wing sme amunt f state incme tax when they file their 2017 tax return shuld cnsider paying that amunt befre the end f This can be dne by either increasing withhlding between nw and year-end r making a separate payment t the state. Hwever, taxpayers wh are in (r are clse t being in) the AMT wuldn t benefit frm this pre-payment, s waiting t pay that balance due until the return is filed in April is likely the better ptin. Sme taxpayers have cnsidered pre-paying their entire 2018 state tax liability befre the end f 2017 in rder t ensure a deductin. Sme states will even issue a withhlding exemptin certificate that can be prvided t their emplyer in thse cases. Hwever, this bill cntains a prvisin that specifically denies a 2017 deductin fr pre-paid state taxes in thse situatins. Fr mrtgages entered int after December 15, 2017, the deductin fr the interest paid will be limited t the first $750,000 f debt. Tday, interest n mrtgage debt up t $1 millin is deductible, and thse existing lans will be grandfathered under the current law. In additin, the deductin fr interest paid n hme equity lans bth new lans and existing will be eliminated. The deductin fr interest paid fr a secnd hme will still be allwed under this new bill, as lng as the cmbined debt n the tw hmes desn t exceed the applicable limit. This bill makes tw substantive changes t the deductibility f charitable cntributins. Dnatins f cash t public charities will nw be deductible up t 60% f Adjusted Grss Incme (AGI), rather than the current 50% limit. In additin, the charitable deductin fr 80% f the amunt paid t a cllege fr the right t purchase athletic tickets will be repealed. The Senate and the Huse tk ppsite appraches t the deductin fr medical expenses, with the Huse repealing it and the Senate expanding it. The cmprmise tk the Senate apprach, and will nw make it easier t deduct these expenses. Effective fr 2017 and 2018 nly, medical expenses will be deductible as lng as they Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 3 f 9

4 Highlights f the Final Tax Cuts and Jbs Act, cntinued exceed 7.5% f AGI. After 2018, the AGI flr will return t 10%. This is ne f the very few changes that will impact Persnal casualty lsses will n lnger be deductible, ther than thse attributed t a disaster as declared by the President. Thse lsses will remain deductible subject t the current limitatins. Expenses that fall under the categry miscellaneus itemized deductins will n lnger be deductible. These expenses are currently subject t the 2% f AGI flr, and include items such as tax preparatin fees, investmentrelated expenses, hbby-related expenses (t the extent f hbby incme), trustee fees (including fees paid fr an IRA), safe depsit bx rental, unin dues, etc. The deductin fr alimny paid t an ex-spuse will als be disallwed, and the incme will n lnger be taxable t the recipient. This will nly apply t divrces entered int after 2018 (the riginal prpsal applied after 2017), s existing agreements generally will nt be impacted. Hwever, if an existing agreement is mdified after 2018, the parties can elect t be subject t this new rule. Mving expenses will n lnger be deductible, ther than fr members f the armed frces wh mve due t a military rder. Currently, lsses frm gambling can nly be deducted t the extent f gambling winnings, while ther expenses cnnected t gambling can be deducted in excess f winnings. This bill caps the deductin fr bth lsses and ther expenses t the amunt f gambling winnings. One cncessin made t high-incme taxpayers has t d with the phaseut f itemized deductins (aka, the Pease limitatin). In 2017, cuples begin t lse the benefit f their itemized deductins nce AGI exceeds $313,800 ($261,500 fr singles). This phaseut will be repealed in By limiting the deductin fr incme and prperty taxes and increasing the standard deductin, many taxpayers will switch frm itemizing t taking the standard deductin. This will certainly simplify recrd keeping fr many individuals, but it als remves an incentive t make annual gifts t charity. One strategy that may becme mre ppular: the use f Dnr Advised Funds, which can be funded with large gifts up frnt while delaying the actual distributin t a charity. Taxpayers may even want t create and fund these accunts befre the end f Unless therwise stated, all f the abve changes expire after 2025, after which the treatment f these expenses will be reinstated t their 2017 status. MANDATE TO PURCHASE HEALTH INSURANCE This bill adpts the Senate prvisin that will effectively eliminate the requirement fr all individuals t be cvered by a health plan that prvides minimum essential cverage. Under the Affrdable Care Act that was passed in 2010, individuals wh dn t purchase a plicy meeting varius requirements, and wh aren t therwise exempt frm ding s, wuld pay a penalty equal t the greater f a specified dllar amunt r a certain percentage f their incme. Under this new law, the penalty fr nt purchasing insurance will be reduced t $0 in 2019 (ne year later than mst ther prvisins in this bill), effectively ending the requirement. Insurance plicies that are currently available thrugh the varius health care exchange prgrams will cntinue t be ffered. ENHANCED CHILD CREDIT The new law will expand the existing child tax credit in the fllwing ways: The credit amunt will be expanded frm $1,000 per qualifying child t $2,000. Children under age 17 at the end f the year will be eligible fr the credit, matching current law. One f the earlier prpsals wuld have extended this t age 18, but it did nt make the final bill. There will be a new $500 credit fr qualifying dependents nt eligible fr the $2,000 child credit. Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 4 f 9

5 Highlights f the Final Tax Cuts and Jbs Act, cntinued These credits will be phased ut nce incme exceeds $400,000 fr cuples ($200,000 fr all ther taxpayers), up frm the current $110,000 and $55,000 levels (fr cuples and singles, respectively). All f the changes t the child credit expire after 2025 and revert back t the laws in effect fr REDUCED TAXES ON PASS-THROUGH BUSINESS INCOME One f the ther majr themes f this tax refrm debate has been a reductin in the taxes paid by businesses, and it was an area f significant difference between the tw riginal prpsals. The final bill ended up clser t the Senate versin by exempting 20% f all net business taxable incme earned by a partnership, S Crpratin r sle prprietrship. This new law makes n distinctin between passive and active wners f a business, meaning bth appear t benefit frm this prvisin. In rder t help prevent abuse f this exclusin, there are a variety f limitatins impsed as explained belw: The 20% exemptin is capped at the greater f: 50% f the amunt f wages paid t emplyees and reprted n a W-2. 25% f thse same wages plus 2.5% f the cst f depreciable prperty wned by the business. This W-2-related threshld des nt apply t cuples with taxable incme belw $315,000, but is phased in ver their next $100,000 f incme ($157,500 and $50,000 fr all ther taxpayers). Cuples ver $415,000 (and thers ver $217,500) will be fully subject t this W-2 limit. This exemptin generally des nt apply t specified service businesses, which include thse in the fields f health, law, accunting, actuarial sciences, perfrming arts, cnsulting, financial services, brkerage services, r any ther business where the primary asset is the reputatin r skill f its emplyees. Engineering and architecture businesses were remved frm this list in the final bill. As with the W-2 threshld, the exclusin fr service crpratins will nt apply t cuples with taxable incme belw $315,000, and is phased in ver their next $100,000 f incme ($157,500 and $50,000 fr all ther taxpayers). Cuples ver $415,000 (and thers ver $217,500) will be fully subject t this limitatin n service crpratins. The 20% exemptin will apply t dividends frm a real estate investment trust (REIT) and certain cperatives, as well as incme frm a publicly traded partnership. These items will nt be subject t the W-2 wages requirement. Lsses realized by a business in ne year will be treated as a lss in the fllwing year fr purpses f this exemptin. In ther wrds, a business culdn t generate a deductible lss in ne year, but then have incme the next year that benefits frm the exemptin. That incme in year 2 must be ffset by the lss in year 1 befre calculating the 20% exemptin. Any amunt paid t an S Crpratin wner that is treated as cmpensatin (i.e., reprted n a W-2) will nt be eligible fr the exemptin, nr will guaranteed payments paid t a partner in a partnership. All f the changes t the taxatin f pass-thrugh business incme will expire after At that pint, pass-thrugh business incme will again be taxed using the standard individual tax rates and brackets. As a result f this change (and the new lwer tax rate n C Crpratins, discussed belw), the decisin n hw t structure a business becmes much mre cmplicated. Prir t this law, pass-thrugh entities were generally viewed as the mst tax-efficient structure. They will nw have a tp effective tax rate f 29.6% still less than C Crpratins. Hwever, the limitatins put n qualifying fr the 20% exemptin may have sme pass-thrugh businesses recnsider becming a C Crpratin. One ther change related t businesses ther than crpratins will limit the ability t deduct excess business lsses. Under this rule, a cuple can deduct a net lss frm a business f up t $500,000 against their ther incme that year Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 5 f 9

6 Highlights f the Final Tax Cuts and Jbs Act, cntinued ($250,000 fr ther taxpayers). Any lss in excess f that limit will be cnsidered a Net Operating Lss and will be carried frward t future tax years. This will nly apply t lsses incurred in 2018 thrugh IRA RECHARACTERIZATIONS This bill will permanently eliminate the ability t recharacterize a Rth cnversin after the cnversin is cmpleted. Currently taxpayers have until Octber 15 f the year after the year f cnversin t essentially change their mind n ding the cnversin. This technique allws taxpayers t und cnversins if the accunt has fallen in value, r even d large cnversins up frnt and then reduce them later t an amunt they re willing t pay tax n. Under this bill, nce a Rth cnversin is cmpleted, the cnversin amunt cannt be changed. In ther wrds, taxpayers must be willing t fully cmmit t the cnversin nce it s cmpleted. As a result f this change, taxpayers wh did a Rth cnversin in 2017 and are cnsidering a recharacterizatin shuld make their decisin befre the end f While it s unclear if this change applies t cnversins dne in 2017 r just thse in 2018, it makes sense t d the recharacterizatin in 2017 rather than take the chance it s nt available.. This bill des nt prevent a recharacterizatin f a cntributin t either a Traditinal r Rth IRA (as had been in the riginal prpsals), nr des it change the tax treatment f cntributins t retirement plans (s called Rthificatin ) r make any ther changes t the rules fr IRAs, Rth IRAs, etc. It als des nt prevent the backdr Rth cntributin technique. CHANGES TO THE KIDDIE TAX The current versin f the kiddie tax requires any nn-earned incme ver a threshld t be taxed as if it belnged t the child s parent. Under this new law, that incme will be taxed using the new trust tax rates. Thse rates are shwn belw: Ordinary Taxable Incme Ordinary Incme Tax Rate Capital Gain Incme Capital Gain Tax Rate $0 2,550 10% $0 2,600 0% $2,550 9,150 24% $2,600 12,700 15% $9,150 12,500 35% $12, % $12, % Any earned incme fr the child will be taxed using the single tax brackets and rates. Under this new law, there will be n change in the definitin f children subject t this tax, and the tax assessed n the child will nt be affected by the incme f their parents r their siblings, unlike tday s law. These revised kiddie tax rules expire after 2025 and revert back t the law in effect fr EDUCATION INCENTIVES The riginal prpsal issued by the Huse wuld have mdified r repealed several educatin-related tax incentives. The Senate versin pared that list back quite a bit, and nly tw f thse items survived in this bill. The final changes are as fllws: Sectin 529 plans will be able t distribute up t $10,000 per year t cver the cst f K-12 expenses while enrlled in a public, private r religius schl. Tday, the nly tax-preferred way t save fr thse csts is by using a Cverdell Educatin Savings Accunt. N changes were made t the rules regarding Cverdell accunts. Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 6 f 9

7 Highlights f the Final Tax Cuts and Jbs Act, cntinued If a student lan is discharged due t the death r permanent disability f the student, that discharge will n lnger be cnsidered taxable incme. The discharge f debt prvisin expires after 2025, while the K-12 change is permanent. ENHANCEMENTS TO ABLE ACCOUNTS ABLE accunts are a tax-preferred way fr thse with disabilities t save. Annual cntributins are capped at the annual gift exclusin amunt ($14,000 tday) and are nt deductible, but earnings in the accunt are tax-deferred, and can be tax-free if withdrawn fr qualified disability expenses. This bill will allw ABLE beneficiaries t cntribute their wn earnings t the accunt nce the $14,000 limitatin is reached after gifts frm thers, subject t ther limitatins. These cntributins by the beneficiary will als qualify fr the saver s tax credit, and can be made as sn as this bill is enacted (typically the date the President signs the bill). In additin, a 529 accunt where a disabled individual is the beneficiary culd be rlled int an ABLE accunt wned by that same individual. The rllver will cunt twards the annual cntributin limit t the ABLE, hwever. These changes expire after 2025 and revert back t the law in effect fr ESTATE TAX CHANGES This bill will duble the estate exemptin beginning in The exemptin is currently scheduled t be $5.6 millin, meaning it will becme $11.2 millin per persn, r $22.4 millin per cuple. Thse wh had already used their estate exemptin in prir years will be able t make additinal tax-free gifts t nn-spuse beneficiaries next year. There are n ther changes t the gift, estate r generatin skipping transfer taxes. The Huse prpsals t repeal the estate tax and lwer the gift tax rate were nt included in the bill. This increased estate tax exemptin expires after 2025 and reverts back t the law in effect fr 2017 with inflatin adjustments. ALTERNATIVE MINIMUM TAX CHANGES Rather than repealing the Alternative Minimum Tax as the Huse had prpsed, this bill fllws the Senate versin and will increase the exemptin amunts, thereby reducing the number f taxpayers subject t AMT. Under the bill, the AMT exemptin fr cuples will increase frm $84,500 in 2017 t $109,400 in 2018 (and frm $54,300 t $70,300 fr singles). The AGI level at which the exemptin is phased ut will als increase, frm $160,900 in 2017 t $1,000,000 in 2018 fr cuples (and frm $120,700 t $500,000 fr singles). As a result, executives lking t exercise Incentive Stck Optins shuld cnsider delaying thse exercises until And thse with AMT credit carryvers will find it much easier t recver thse with these larger AMT exemptin levels. These increased exemptins and phaseut levels expire after 2025 and revert back t their 2017 levels, with inflatin adjustments. BUSINESS TAX CHANGES While businesses structured as pass-thrugh entities will be eligible fr a new deductin f 20% f their incme, thse perating as C Crpratins will instead be subject t a new tax rate. These crpratins, which pay their wn tax rather than pass incme thrugh t their wners, will mve frm a tax rate f essentially 35% t a new flat rate f 21% fr tax years beginning with 2018 (previus prpsals had called fr a 20% rate beginning in 2019). This bill cntains many ther prvisins affecting businesses, sme f which are highlighted belw: Businesses can fully expense 100% f the cst f qualified prperty placed in service after September 27, 2017 and befre The 100% will fall t 80% fr 2023, 60% fr 2024, 40% fr 2025 and 20% fr 2026, and then will reach 0% fr 2027 and beynd. Currently businesses can immediately deduct 50% f that cst (with the 50% Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 7 f 9

8 Highlights f the Final Tax Cuts and Jbs Act, cntinued scheduled t gradually decrease and then expire in 2020), and then depreciate the balance f the cst ver the asset s useful life. Businesses can currently expense up t $500,000 fr the purchase f prperty cnsidered Sectin 179 prperty, as lng as their ttal assets placed in service fr the year dn t exceed $2 millin. This bill permanently increases the expense amunt t $1 millin and the phaseut threshld t $2.5 millin, and then indexes bth amunts fr inflatin. The bill als expands the definitin f prperty eligible fr the deductin. This is effective fr prperty placed in service after Between these tw changes, large businesses may wish t delay the purchase f significant assets until after 2017 in rder t take advantage f these increased deductins. Like-kind exchanges will nly be allwed fr real prperty (including rental prperties), and nt fr persnal prperty (such as vehicles r equipment). The deductin fr interest expense will generally be limited t the sum f the business s interest incme plus 30% f ther taxable incme, with sme adjustments. Excess interest culd be carried frward indefinitely. Businesses with average grss receipts f less than $25 millin ver the prir 3 years will be exempt frm this limitatin. The carryback f Net Operating Lsses will essentially be repealed (with sme exceptins fr farmers and insurance cmpanies), but thse lsses can instead be carried frward indefinitely (versus fr just 20 years tday). Only 80% f current incme will be able t be ffset with an NOL carryfrward, with the remainder f the NOL cntinuing t carry frward. The crprate AMT will be permanently repealed. Businesses can n lnger deduct the cst f entertainment r recreatin activities, r membership dues relating t thse activities, as well as n-premises gyms r ther amenities fr emplyees that are primarily persnal in nature. Beginning in 2019, emplyers can claim a tax credit equal t 12.5% f the wages paid t an emplyee n family and medical leave (FMLA), as lng as they re paid at least 50% f their nrmal wage. The credit rate will increase as the FMLA payment increased abve 50% f nrmal wages. EMPLOYER-PROVIDED FRINGE BENEFITS Emplyers are currently able t prvide a variety f fringe benefits t their emplyees withut the emplyee having t reprt them as taxable incme. This bill will repeal the exclusins fr emplyer-reimbursed mving expenses and bicycle cmmuting expenses. Bth f these items expire after 2025, making these reimbursements tax-free again in MISCELLANEOUS PROVISIONS A variety f ther changes are included in this bill, including the fllwing: Tax-exempt rganizatins will be subject t a 21% tax n cmpensatin ver $1 millin paid t their five highest paid emplyees fr the year. Private clleges and universities with at least 500 tuitin-paying students will be subject t a 1.4% tax n their net investment incme if their assets nt directly used fr educatinal purpses exceeds $500,000 per student. The new law extends the time in which an emplyee can pay back a lan frm their 401(k) plan and avid an ffset, but nly if the ffset is due t leaving the emplyer r the emplyer terminating the plan. EARLIER PROPOSALS NOT IN THE FINAL BILL Amng the changes that were previusly cnsidered by either the Huse r Senate, but were nt included in the final bill, are the fllwing: Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 8 f 9

9 Highlights f the Final Tax Cuts and Jbs Act, cntinued The change that wuld have required taxpayers t determine the cst basis f any security sld after December 31, 2017 n a first-in, first-ut basis, therwise knwn as the FIFO rule, was remved. Investrs can cntinue t specifically identify a tax lt t sell when multiple lts (with different cst basis and hlding perids) f a psitin are wned. N changes will be made t the rules regarding excluding the gain frm the sale f a persnal residence. The deductin allwed fr educatrs wh prvide supplies and ther materials fr their classrm will remain $250, rather than increase t $500. The prpsed Family Credit f $300 per persn nt eligible fr the enhanced Child Credit was nt included. Regarding educatin-related prvisins: The Hpe Schlarship Credit and the Lifetime Learning Credit will remain, and the American Opprtunity Credit will remain available nly fr the student s first fur years f cllege. Interest n student lans will cntinue t be deductible. Free tuitin and cash prvided t emplyees f clleges (and their spuses and children), such as graduate students, will remain tax free. Interest n US savings bnds will remain tax-free up t the amunt f qualified cllege expenses. Emplyer will still be able t prvide up t $5,250 f educatinal assistant t emplyees tax-free. In additin t educatin assistance, the fllwing ther emplyer fringe benefits will cntinue t be tax-free fr emplyees: Husing prvided t an emplyee fr the cnvenience f the emplyer, qualified adptin expenses paid fr r reimbursed by the emplyer, and emplyee achievement awards. Tax-deductible cntributins t Archer Medical Savings Accunts and Dependent Care Flexible Savings Accunts will cntinue t be allwed. The cst f nnresidential real prperty and residential rental prperty will cntinue t be deducted ver 39 and 27.5 years, respectively, rather than change t 25 years. Interest frm newly-issued private activity bnds will remain exempt frm federal incme tax, althugh it will cntinue t be taxable fr the AMT. The excise tax charged n the incme f private fundatins will remain at 2%, with sme fundatins cntinuing t qualify fr a 1% tax. The prpsal t allw unbrn children t named beneficiaries f a 529 plan was nt included. A prvisin that wuld have allwed 529 plans t be used fr sme hme schling-related expenses was remved as well. Rbert W. Baird & C. Incrprated. Baird des nt prvide tax advice. Please cnsult with yur tax advisr. Page 9 f 9