The House Democrats released their
"HEROES Act" proposal for the next round of coronavirus stimulus today. Being a giant nerd, I skimmed over the tax-related provisions. Some interesting bits:
Payments to individuals:
* The $500 extra payment on the first round of checks would be given for dependents of any age, not just kids under 17. (page 150)
* Another round of stimulus payments would go out. Details look pretty similar to the last round, except dependents would get $1,200 this time, limit 3 dependents. (page 160)
* Stimulus checks would no longer be able to bear the signature of the president, vice president, or cabinet officials. (page 186)
Earned income credit:
* More people with no kids would get this credit, and they would get more money from it. 2020 only. (page 188)
* The limit on investment income to qualify for this credit would be eliminated
indefinitely. This could be a big deal for folks in this FIRE community if it comes to pass. (page 194)
* People whose earned income changed from 2019 to 2020 would be able to elect to use their 2019 earned income to compute this credit. (page 204)
Child tax credit:
* The $1,400 limit on the amount that can be treated as a refundable tax credit would be eliminated for 2020. (page 207)
* Amount for 2020 would be increased to $3,000, or $3,600 for kids under 6. (page 208)
* 17-year-olds would qualify for the credit. This would be an
indefinite change. (page 208)
* The government would start sending out monthly advance payments of the child tax credit for the rest of this year. (page 208)
Child/dependent care:
* For 2020, the amount of expenses per dependent that can be claimed for the child/dependent care tax credit would double to $6,000, the credit would be a higher percentage of these expenses for most taxpayers, and the credit would be refundable. (page 216)
* For 2020, dependent care FSAs would have a $10,500 limit. (page 217)
FSAs:
* The limit on year-to-year carryovers for medical FSAs would increase to $2,750 for 2020->2021 carryovers only. (page 218)
* Several other changes allowing larger FSA grace periods for this year, allowing people to increase their contribution mid-year one time only, and more.
Deductions:
* The $10k cap on deductions for state and local taxes would be eliminated for 2020 and 2021 (page 224)
* The maximum deduction teachers can take for supplies would increase for $500, indefinitely. (page 225)
* First responders would be able to take a $500 above-the-line deduction for uniforms or professional development classes, and for 2020 this would also apply to "COVID-19 front line employees." (page 226)
Employee retention credit:
* There would be a pretty massive expansion to the employee retention credit passed in the previous CARES Act.
* The credit would cover 80% of qualifying wages (up from 50%). (page 236)
* The maximum amount of qualifying wages per employee would increase to $15k quarterly/$45k all year, (up from $10k all year). (page 236)
* The threshold for qualifying as a small employer (and therefore getting a credit for employees who are still working during the pandemic) would increase to 1,500 employees. (page 237)
* Employers who are not shut down and experience a 10-49% year-over-year drop in quarterly revenue would be eligible for a partial credit. (page 238)
* Certain state/local/tribal governments would be eligible for this credit. (page 244)
Other business tax credits:
* A new 30-50% tax credit would be available to offset part of the first $5,000 of qualified pandemic relief payments given to employees. (page 228)
* A new credit, with similar qualification criteria as the employee retention credit, would cover 50% of employer rent/mortgage/utility bills during qualifying quarters. The amount of qualifying expenses per quarter would be capped at $50k (less for certain employers with low payroll expenses and/or revenue). (page 245)
* A new refundable "business interruption credit" would give money to certain self-employed individuals who saw their business income go down by at least 10% in 2020. (page 258)
* The new credits for paid sick leave and family leave would be extended through 2021, and would be expanded some to cover more people. (page 267)
Required minimum distributions:
* RMDs from 2019 and 2020 would be cancelled. (page 658)
* RMDs that have already been taken for those years can be repaid as if they were a rollover, exempt from the normal 60-day requirement. (page 659)
This bill is an early proposal from one party and is sure to go through many changes as part of Congress's sausage factory. Even so, it's interesting to see some of what's in their wish list. I wouldn't be surprised to see much of it make it through to law in some form as this pandemic continues to drag on.