Federal tax proposals could affect veterinarians

Published on October 10, 2018

AVMA brings veterinary voices to the conversation

Tax law changes under consideration by Congress and federal rulemakers could change the fiscal landscape for many veterinarians. The AVMA is working on multiple fronts to ensure that veterinary voices are heard in the debate.

On October 1, the AVMA submitted comments to the U.S. Department of Treasury and the Internal Revenue Service (IRS) asking that veterinary practices be allowed to take full advantage of the pass-through income tax deduction provided in last year's Tax Cuts and Jobs Act. This deduction is available to owners of sole proprietorships, partnerships, trusts and S-corporations – including veterinary businesses. But for veterinary business owners and some other groups, there are income limits attached. As currently planned, the full deduction will be available only for veterinary practice owners with taxable income up to $315,000 if filing jointly or $157,500 if filing individually. Limited deductions are available to practice owners with taxable income of $315,000- $415,000 if filing jointly or $157,500-$207,500 if filing individually. AVMA is urging the IRS to remove the income limits for veterinarians. The National Federation of Independent Businesses, a small business association, also submitted comments in support of our position.

In Congress, the House of Representatives recently passed three new tax bills that might be of interest to veterinarians. All of these are now awaiting consideration in the Senate:

  • Permanence or “Tax 2.0”: H.R. 6760, the Protecting Family and Small Business Tax Cuts Act of 2018 led by U.S. Reps. Rodney Davis (R-Ill.), Mark Meadows (R-N.C.) and Mark Walker (R-N.C.), would make the individual tax cuts enacted in December 2017 permanent. These include the pass-through deduction and a $10,000 limit on the deduction for state and local taxes.
  • Savings: H.R. 6757, the Family Savings Act of 2018, led by U.S. Rep. Mike Kelly (R-Penn.), would expand and establish new savings vehicles for families and small business owners. Among other provisions, it would expand eligibility for pooled employer retirement plans, create a universal savings account that is penalty- and tax-free, authorize penalty-free withdrawals from retirement plans in the event of child birth or adoption, and enhance existing education savings plans.
  • Innovation: H.R. 6756, the American Innovation Act of 2018, led by U.S. Rep. Vern Buchanan (R-Fla.), would increase the deduction for start-up business expenses from $5,000 to $20,000, phasing it out as startup costs exceed $120,000.

AVMA is reviewing the bills closely and is particularly interested in the Family Savings Act, as it contains provisions of interest to the profession, such as pooled retirement plans and universal savings accounts.

It’s not yet clear if the Senate will vote on the bills before the end of the current Congress, but we have seen movement recently on retirement savings from the White House. President Trump in late August issued an executive order directing government agencies to look at clarifying who may sponsor a multiple-employer retirement plan, with an eye toward expanding savings options for part-time workers, sole proprietors, working owners, and entrepreneurs with non-traditional employers. This rule is expected to follow the model set by the prior executive order on association health plans, which allows groups of employers to band together to provide employee benefits.

Time is winding down in the 115th Congress, but tax policies are sure to be a focus during the lame duck session and into the new Congress, set to begin in January. For more information about federal tax provisions, the IRS has created a “Tax Reform Guidance” web page that includes all regulations, revenue procedures, notices, and resources issued to date.

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