Saratoga Tax Lawyers Ainer & Fraker, LLP discuss the budget proposal released by President Obama on April 10, which includes a substantial number of proposed tax changes impacting individuals, businesses, estate taxation, energy incentives, and international issues.
Although these are only proposals, they provide an insight into the administration’s thinking on tax reform. provide an overview of the most prominent issues related to individuals and small businesses below:
- Reduce the value of itemized deductions and other tax preferences to 28% for families with income in the three highest tax brackets. This limit would apply to all itemized deductions; foreign excluded income; tax-exempt interest; employer-sponsored health insurance; retirement contributions; and selected above-the-line deductions.
- Observe the “Buffett rule” by requiring millionaires to pay no less than 30% of income (after charitable contributions) in taxes. This would be referred to as the “fair share tax.”
- For tax years beginning after Dec. 31, 2017, permanently extend the American Opportunity Tax Credit (AOTC), a partially refundable tax credit worth up to $10,000 per student over the course of four years of college.
- For tax years beginning after Dec. 31, 2017, permanently extend the increased refundability of the child tax credit (CTC) by permanently reducing the earned income threshold to $3,000.
- Extend the exclusion from income for the cancellation of certain home mortgage debts to amounts that are discharged before Jan. 1, 2016 and amounts that are discharged pursuant to an agreement entered into before that date.
- For tax years beginning after Dec. 31, 2017, make permanent the expansion of the EITC for workers with three or more qualifying children by maintaining (i) at 45%, the phase-in rate of the EITC for workers with three or more qualifying children, and (ii) the phase-out range for married couples at $5,000 higher than those for unmarried filers (indexed after 2009).
- Increase the child and dependent care credit available to working families with incomes between $15,000 and $103,000.
- Extend the exclusion for income from the discharge of qualified principal residence indebtedness (QRPI) to amounts that are discharged before Jan. 1, 2015, and to amounts that are discharged pursuant to an agreement entered into before that date.
- Prohibit individuals from accumulating over $3 million in tax-preferred retirement accounts.