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U.S. House passes retirement tax bill, includes kiddie tax relief

House passes retirement tax bill, kiddie tax relief

The U.S. House of Representatives today passed, by a vote of 417 to 3, H.R. 1994, the “Setting Every Community Up for Retirement Enhancement Act of 2019” – the “SECURE Act.”

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Summary

Previously, the Ways and Means Committee on April 2, 2019, reported to the full House the SECURE Act. The bill, as approved by Ways and Means, contained a number of retirement savings provisions, including:

  • Increased required minimum distribution age from 70.5 years to 72 years after 2019 for certain taxpayers
  • Accelerated required distribution rules for many designated beneficiaries
  • Increased penalties for failures to file
  • Portability of lifetime income options

Read TaxNewsFlash


A “manager’s amendment” made a number of changes to the bill reported by the Committee on Ways and Means, including:

  • Removing provisions related to 529 plans and homeschooling and secondary school expenses, and
  • Adding a provision to repeal “kiddie tax” measures under Code section 1(j)(4) that were added by the 2017 Tax Act so that unearned income of children would not be taxed at trust rates.

The kiddie tax change generally would be effective for tax years beginning after December 31, 2018, but a taxpayer could elect to apply it retroactively to tax years beginning after December 31, 2017.

Read the manager’s amendment [PDF 34 KB].


The Joint Committee on Taxation (JCT) released a revenue estimate of H.R. 1994 as considered by the House (including the manager’s amendment): JCX-23-19


House Ways and Means Chairman Richard Neal (D-MA) made the following statement after today’s vote by the House:

The legislation closes loopholes and makes it easier for small business employees, home care workers, and long-term part-time workers to save for retirement. … [and includes] a much-needed fix to reverse unfair and unexpected high taxes on Gold Star families, low-income scholarship recipients, and children of fallen first responders, among others. 

What’s next?

The Senate yesterday passed a bill (S. 1370) to treat certain military survivor benefits received by a child as earned income for purposes of the kiddie tax. Read TaxNewsFlash.

The Senate has not yet acted on retirement tax legislation. Although it is not certain, the Senate might consider the House bill, possibly as soon as this evening.

For a bill to become law, identical legislation must pass both the House and the Senate and must be signed by the president.

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