On Wednesday, February 26th House Ways & Means Chairman Dave Camp (R. Mich.) released a long-anticipated draft of a comprehensive tax reform plan. The goal of the reform plan is to simplify the tax code by eliminating a myriad of deductions and reducing tax rates for most taxpayers.
Contained within the tax reform plan are changes to the moving expense and mortgage interest deductions which would most certainly have a negative impact on employee relocation. The moving expense deduction would be eliminated entirely. Although the draft does not provide any analysis of the reason, it claims the repeal would raise some $8 billion over the ten years from 2014-2023. The mortgage interest deduction would be retained, but would be limited in size and scope.
The current $1 million limitation on mortgage debt would be reduced to $500,000, but phased in over a four year period beginning with debt incurred in 2015. Interest on debt incurred prior to the reductions would continue to be deductible. Home equity indebtedness incurred after 2014 would no longer be deductible at all. The proposal also retains the ability to deduct mortgage interest on up to two homes, and specifies that debt that is refinanced after the new rules go into effect will remain subject to the old ones. The reporting provisions for mortgage interest would also be stiffened.
It is expected there will be no congressional action on the reform package in the near future and the intention of releasing the draft early is to stimulate debate leading to eventual tax reform that may yet be years away.
For more information regarding the tax reform plan click on the LawBlog of the Worldwide Employee Relocation Council.