While discussions about Affordable Health Care fade after the Senate failed to pass a repeal and replace bill last week, discussions about tax reform are beginning to heat up.  The National Association of Enrolled Agents (NAEA) provided the following update this morning.  

It is important to keep in mind that to avoid 60 votes in the Senate, congressional Republicans have chosen a budget process known as "reconciliation" for both ACA repeal and tax reform. Reconciliation was originally intended as a limited mechanism to force Congress to lower the deficits. Both parties have used it, however, for other purposes in recent past: The Bush tax cuts and part of the Affordable Care Act being the most prominent examples.
 
To use reconciliation, the House and the Senate must pass a joint resolution laying out a budget blueprint with so-called reconciliation instructions. The House Budget Committee has reported out such a resolution for FY 2018. The conservative Republican Study Committee, a bloc of 150 ultra-conservative House members, has indicated that they may not support the committee reported resolution unless it calls for deep cuts in entitlements and domestic spending. Therefore, Speaker Ryan has delayed floor consideration until September. Even if House leadership agrees with the demands of the Republican Study Committee, it is highly unlikely that the Senate would go along with their agenda. In short, no resolution means no reconciliation, resulting in no vehicle for tax reform. 
 
Republican leadership intended to use the savings from repealing the ACA to help pay for tax reform. Additionally, the leadership in the Senate, House and Department of Treasury have indicated that they have abandoned the border adjustability proposal for tax reform, leaving a large trillion-dollar revenue hole in a potential bill. It is unclear if tax writers would have enough political will power to repeal current deductions and credits to the extent necessary to cover such a large shortfall.

Turner's Tax Service will continue to keep you updated as tax reform begins to move through the legislative process. 

The IRS recently posted the following reminder -Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.

Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:

• Owned the home for at least two years  
• Lived in the home as their main home for at least two years
  
• If there is a profit from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the profit from income or $500,000 on a joint return in most cases. 
• If there is a loss from the sale, that loss is not deductible.
• If the property has been a rental for any portion of the five-year prior prior to the sale, the amount of profit that may be excluded may be limited.

Possible Exceptions.  There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. For more information information about those situations, contact your tax preparer.
Items to Keep In Mind:

• Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home, such as a vacation home.
• Taxpayers who used the first-time home buyer credit to purchase their home have special rules that apply to the sale. 
• Taxpayers moving after the sale of their home should update their address with the U.S. Postal Service and all creditors.
• Taxpayers who purchased health coverage through a Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.

Turner's Tax Service is prepared to assist you with the proper and accurate reporting of the the sale of your house.  Please give us a call at 530-626-8551