Most of the attention on the Bill relates to coverage and subsidy changes. However, the bill does have some significant tax relief included. While the bill still faces changes to get through both houses of Congress and the existential question whether the Senate will pass it, it is not too early to take a look at these changes.
One key change is to eliminate the 0.9% Medicare surtax on wages. Currently, earners pay a 1.45% Payroll Tax on wages up to $200,000 ($250,000) if married. Earnings above that level are subject to an additional 0.9% payroll tax. This 0.9% payroll tax will go away under the bill (but not until 2023).
Another is the elimination of the 3.8% Medicare tax on investment income. As a tax practitioner, I've got my fingers crossed on this one. From day one, I couldn't stand the complexity of this tax - the whole statutory scheme was crazily complicated for such a small tax. I would love to see the net investment income definitions, modified AGI definitions, rules for applying to trusts, and interfacing with the passive loss rules swept away into the dustbin of tax history. If I never see the acronyms NII and MAGI again, it will be too soon.
Health Savings Accounts (HSAs) would also get a boost - the amount of deductible contributions to an HSA in a year would double from current levels. The bill would also end the Obamacare prohibition on using HSAs to pay for over-the-counter medications. Siimilar benefits will apply to flexible spending accounts.
After 8 years of tax proposals that pretty much only increased taxes (except perhaps as to the increased exemption amounts for transfer taxes), it is a strange feeling to see tax incentives and reductions once more on the table.