Student, small business provisions protected in reform measure

Tax overhaul passes, includes AOA-backed provisions

Congress finalized its sweeping overhaul to the federal tax code, repealing the individual mandate in the process, but retaining several AOA-backed provisions that ensure reform is fair to doctors of optometry and students.

"AOA volunteers and staff worked tirelessly to advance optometry’s priorities and ensure that any reform measures that did pass would be positively impacted by AOA."

Following months of debate, the "Tax Cuts and Jobs Act" cleared Congress Wednesday for President Donald Trump's signature, delivering some Americans tax relief while simplifying the tax code and permanently decreasing the corporate tax rate. Although the legislation maintains seven individual income tax brackets, it would lower rates temporarily through 2025 and cut some deductions and special-interest tax breaks.

The finalized language also removed the Affordable Care Act's individual mandate for health insurance coverage, a move that would reportedly reduce federal deficits but lead more people to lack insurance and, in turn, increase premiums.

AOA volunteers and staff worked tirelessly to advance optometry's priorities and ensure that any reform measures that did pass would be positively impacted by AOA.

In November, AOA Trustee Ron Benner, O.D., joined a Capitol Hill meeting with Sen. Steve Daines (R-Montana) to discuss the need for tax relief for small business optometry practices. Within hours, Sen. Daines secured a pass-through provision in the Senate's tax bill-retained in the final bill-that helps doctors of optometry.

This pass-through exception means many small business optometry practices will now qualify for a first-ever 20-percent deduction on pass-through income that applies to single filers with income under $207,500 ($157,000 pass-through and a phase-out for an additional $50,000 W-2), or $415,000 ($315,000 and a phase-out for an additional $100,000 W-2) for married filers. Previous versions of the bill would have excluded "specified trade or business" filers, such as doctors; however, the AOA-backed provision provides an exception for these filers in the final version.

Led by Christopher J. Quinn, O.D., AOA president, volunteers and staff also worked diligently to preserve tax protections for optometry students and new doctors of optometry. These efforts helped reverse earlier versions of the tax bill that would have eliminated the student loan interest deduction and would have started to treat graduate student tuition benefits as taxable income.

Additionally, AOA worked to preserve Section 179 of the tax code, allowing businesses to deduct the full purchase price of qualifying equipment and software purchased during the tax year. AOA also fought for an increase in bonus expensing that will allow "full expensing" for five years.

"Tax Cuts and Jobs Act" takeaways

Provisions outlined in the "Tax Cuts and Jobs Act" will take effect in 2018 with an average tax cut of $2,059 among a typical family of four earning a median family income of $73,000. Per the House and Senate Conference Committee, here are several policy highlights:

  • Individual tax rates lowered. New rates are 0 percent, 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent.
  • Standard deduction increase. The standard deduction is nearly doubled.
  • State, local tax write offs. Individuals and families may still deduct state and local taxes up to $10,000.
  • Child tax credit increased. The child tax credit was expanded from $1,000 to $2,000, while the bill also preserved popular child and dependent care, and adoption tax credits.
  • Preserves several popular deductions. The mortgage interest, charitable giving and medical expense deductions were preserved.
  • Retirement savings. The tax bill retains popular retirement savings options, such as 401(k)s and Individual Retirement Accounts (IRAs).
  • Corporate tax rate lowered. The tax bill lowers the corporate tax rate from 35 percent to 21 percent.
  • Small business loans. The tax bill protects the ability of small businesses to write off interest on loans.

The AOA continues to follow these and other tax reform issues closely, and members with questions should contact Matt Willette, AOA's director of congressional relations.

December 20, 2017

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