Skip to main content

The House of Representatives approved in September something called Tax Reform 2.0, a collection of three bills designed to build on the Tax Cuts and Jobs Act of 2017 (TCJA), last year's landmark legislation that produced $1.5 trillion in tax cuts.

The bills face a tough road ahead in the Senate: ultimately, some of the changes proposed in Tax Reform 2.0 that are specific to retirement could become law, or it's possible that the bills making individual tax cuts permanent and impacting other business tax issues could just be tabled.

Prior to lawmakers voting last month, Jeffrey Levine, president and founder of Blueprint Wealth Alliance and director of adviser education at, shared his thoughts on the proposed legislation.

"It (the TCJA) was clearly the biggest rewrite in at least three decades or so," Levine said. "But there were a lot of things that the Republicans, at least, tried to get through that they couldn't for various reasons."

One of the biggest problems with the TCJA was that it was constrained by the budget reconciliation process, Levine said. That's the process where lawmakers could pass the bill with a simple majority in the Senate. "There are certain elements of the law that go away, they sunset for individual investors, whereas most of the tax cuts for corporations and so forth are permanent," he said.

For instance, H.R. 6760, The Protecting Family and Small Business Tax Cuts Act of 2018, would make permanent the individual tax cuts that, along with business tax changes, were the center piece of the TCJA, said Levine.

Under the new tax law, the previous individual top rate of 39.6% was reduced to 37% as part of TCJA and the threshold at which top rate applies has been increased to $500,000 for single taxpayers and $600,000 for those married filing jointly, according to the 2018 U.S. Master Tax Guide. Those tax changes, and other individual tax law changes under the TCJA, are scheduled to expire on Dec. 31, 2025.

Levine also said H.R. 6760 would make permanent one of the most controversial provisions of the TCJA -- the Section 199A deduction. Under this provision, owners of a pass-through business can claim a 20% deduction against the "qualified business income" earned by the business, according to the 2018 U.S. Master Tax Guide. "That's big fat deduction for a lot of people out there," he said.

H.R. 6760 would also increase alternative minimum tax (AMT) exemption amount, said Levine. "They're essentially taking the benefits that we have today that are essentially going to sunset for most of them in 2025 and extending them permanently," he said.

Another bill, the Family Savings Act of 2018, H.R. 6757, includes many provisions of the Retirement Enhancement and Savings Act (RESA).

According to a Levine, one of the proposals would eliminates the age limit on individual retirement arrangements (IRA) contributions. Under current law, individuals above 70½ are not allowed to contribute to an IRA but they can contribute -- if they are still working and eligible -- to a 401(k), Simplified Employee Pension (SEP-IRA), a SIMPLE IRA and a Roth IRA -- after age 70½, he said. "You may also, in certain circumstances, have to take required minimum distributions (or RMD) as well, but you are eligible to contribute," he said.

With IRAs, however, you can no longer contribute once you turn 70½ and you must begin taking RMDs at that age as well. "So there's kind of a disconnect between the people who have access to plans (and those who have IRAs)" said Levine. "IRAs are kind of like on their own little island, and the rules are different for them, so this would harmonize those rules."

Another provision would exempt from required minimum distribution rules individuals whose aggregated account balances total less than $50,000. "This makes sense from a perspective of simplifying the tax code for those with smaller balances," said Levine.

Another provision would amend RMD rules with respect to inherited IRAs According to InvestmentNews report, non-spouse beneficiaries who inherit retirement accounts with an aggregate balance of more than $450,000 would need to draw down the assets within five years after the original owner's death.

Under current rules, those who inherit IRAs and defined-contribution accounts can "stretch" distributions over their life expectancy. The bill, according to InvestmentNews, would compress distributions into a much narrower window.

"IRA account owners with very high IRA balances might not like a provision that would put a cap on the amount that the account owner can pass to a non-spouse or a non-disabled beneficiary," Levine says. "Under current law, there is no cap and non-spouse beneficiaries who own an inherited IRA can take distributions over their can withdraw."

The motive behind this change, according to Levine, being this: "People say, 'Hey, it's a retirement account.' Once you're dead, you really don't need a retirement account anymore, so we (the government) want our money. Obviously, that would be a revenue-raiser, and they could use that offset some other provisions in there."

The bill also includes new a "family-friendly" savings provisions called the Universal Savings Account or USA. This account would allow annual cash contributions up to the lesser of $2,500, indexed for inflation, or the gross income of the individual. "This is essentially a savings account for anything," says Levine. "It's kind of like a Roth IRA that you can use for any purpose you want. No rules... Just put money it. It grows. When you take it out, it's tax-free for whatever reason you want to use it for. Which is, it's kind of nice if you want to save for things. Some might say it's a handout at a time when we have fiscal deficits, but it would allow individuals to save more on a tax-free basis than they are able to today."

According to Levine, the bill is likely to pass the House but will get stalled in the Senate. "If the Senate takes this up, it'll be probably very late in the year, but the Senate has expressed very little appetite for taking on Tax Reform 2.0," Levine said. "There are a lot bigger fish to fry in the Senate right now. We've got confirmation procedures and... mid-term elections."

Got questions about Social Security, taxes, money, retirement and/or investments? Email