Movement on Tax Bill
There is movement on the federal tax bill, known as the Tax Cuts and Jobs Act. Late Wednesday, House and Senate Republicans reached a preliminary agreement, while House and Senate Democrats expressed a desire to put a hold on voting until its newly elected senator joins them in January.
Impact on Education
As the president and Congress continue to move forward on the Tax Cuts and Jobs Act, it is important to understand its significant impact on education. There are four substantial areas:
- State and local tax deductions (SALT-D) - Today, taxpayers are allowed to deduct the amount of state and local taxes they pay on their federal income tax return. The House and Senate versions of the bill change how individuals deduct state and local taxes. The bill also repeals the SALT deduction for income and sales tax as well as caps the deduction of property taxes up to $10,000.
- Expansion of 529 plans - Currently 529 plans allow for individuals to put money in an account to pay for postsecondary education. Dollars that are saved and withdrawn are not taxed when withdrawn, and withdrawals are capped at $2,000. Under the proposed tax bill, allowed withdrawals increase to $10,000 and would be allowed to be used for costs associated with public or private elementary, secondary, and postsecondary education. The Senate version allows for homeschooling expenses.
- Changes to school construction finance bond options - The Qualified Zone Academy Bonds (QZABs) would be eliminated under the proposed tax bill. The QZABs allow public agencies, including school districts, to use bonds for renovation or repairs.
- Reliance on deficit financing to pay for tax cuts - To pay for the proposed tax cuts, the bill before Congress allows them to raise the nation's deficit over 10 years - estimated at $1.5 trillion.