House Republicans move their giant tax bill out of the Ways and Means Committee on Thursday.
The bill can only add $1.5 trillion to the deficit over the next 10 years, but the current version adds $74 billion more than that.
Republicans have a few options to fill this gap, including a major change to Obamacare.
House Republicans are trying to figure out how to fill a $74 billion hole on Thursday as they make last-minute edits to their sweeping tax overhaul legislation, the Tax Cuts and Jobs Act (TCJA).
Republicans are attempting to pass their tax overhaul using a process known as budget reconciliation. But in addition to allowing Republicans to pass the bill in the Senate with only Republican votes, it also means the bill must to abide by certain rules.
The original legislation released November 2 fit into this window, but an amendment added Monday by the bill's author — Ways and Means Committee Chair Kevin Brady — pushed the deficit load higher than the allotment.
The amendment adopted Monday made a change to a proposed 20% excise tax on multinational companies' profit movement after an uproar from industry groups. The Joint Committee on Taxation determined that the provision would bring in just $6.5 billion over the next 10 years, down from the original $154.5 billion.
To fix the issue, Brady is expected to introduce what is known as a manager's amendment — a last-second slew of proposed changes to bill that would in theory bring it under the $1.5 trillion threshold.
RELATED: 10 ridiculous tax loopholes
10 ridiculous tax loopholes
10 ridiculous tax loopholes
1. Alaskan Whaling Captain Deduction
Alaskan whaling captains can avoid tax on up to $10,000 of whaling-related expenses per year. Costs they can deduct include purchasing and maintaining the boat, weapons and gear, food and supplies for the crew, and storing and distributing the catch.
When a business pays for capital improvements — like building a new office or buying a new machine — it typically deducts those costs over the life of the asset, which could translate into decades. A special exception exists in the tax code for “certain motorsports entertainment complex property placed into service before Jan. 1, 2017,” which refers to NASCAR tracks and other racing facilities. The exception allows businesses to deduct the costs over seven years, which is much faster than usual.
(Onfokus via Getty Images)
3. Hawaii’s Exceptional Tree Deduction
If you take care of an “exceptional tree” in Hawaii, you can deduct up to $3,000 on your state taxes of what it costs you. A local county arborist advisory committee must declare it an exceptional tree and you’ll need an affidavit from the arborist stating the tree’s type and location and what you paid to maintain it. You can take this deduction only once every three years.
(agaliza via Getty Images)
4. Florida’s Rent-a-Cow Deduction
If you live in Florida and want to pay lower property taxes — perhaps on your second home that has a lot of open land — consider renting some cows. Under greenbelt laws, if you use your land for agricultural purposes, your real estate taxes are based on the agricultural value of the land, not its market value.
This deduction doesn’t explicitly state how many cows you have to raise or even that you have to own them. Developers often let a few dozen rented cows roam their land — sometimes even during construction — to lower their property tax bills.
5. New Mexico’s Centenarian Deduction
If you live to be 100 years old, moving to New Mexico will cut your tax bill because you will pay no tax to the state. A caveat: You cannot take the deduction if you claim someone as a dependent. Paying no state income tax might not be a huge break, but if it’s available, take it.
(gece33 via Getty Images)
6. Qualified Performing Artist Deduction
If you’re searching for a tax loophole you can use — one that doesn’t benefit only the 1 percent — the IRS allows qualified performing artists to deduct certain expenses. To qualify, you must have performed for at least two different employers during the year and received at least $200 from each, had business expenses that exceeded 10 percent of your performing arts income and claimed less than $16,000 in adjusted gross income for the year. If you’re married, that $16,000 limit applies to both your spouse’s and your incomes.
(DragonImages via Getty Images)
7. Home Landscaping Deduction
If you regularly see clients at your home office, you might be able to write off a portion of your landscaping costs. The IRS allows a deduction for the portion of your home costs that are related to your home office, so as long as you use your home office exclusively for business, you might be able to take this one. If keeping your lawn looking good for your clients is part of the job, you’re in luck.
(Elenathewise via Getty Images)
8. Personal Pool Deduction
Install a pool for medical treatments and you could be in for a big tax break. One taxpayer suffering from emphysema and bronchitis was prescribed swimming by his doctor as part of his treatment, so he built a pool and wrote off a portion of the costs as a medical expense. He could deduct only the amount by which the installation cost exceeded the home’s increase in value, but he did get to include upkeep costs.
Deducting body oil on your taxes might sound downright crazy, but you might be able to. One professional bodybuilder needed to shine a little brighter during competition so he applied body oil. When tax season rolled around, he included the cost as a business expense. At first, the IRS disallowed the deduction, but the Tax Court approved because using the oil made him more competitive.
(bekisha via Getty Images)
10. Charity Meat Deduction
Meat packers, butchers and processing plants in South Carolina can earn a $75 state tax credit for each deer carcass they process and donate. You must be licensed with the state or the U.S. Department of Agriculture and you must have a contract with a qualified nonprofit that distributes food to the needy. If you use any of the deer for commercial purposes, you will not qualify for the donation.
One of the most controversial possibilities by which Brady could seek to raise new revenue would be the inclusion of a repeal of the Affordable Care Act's individual mandate. While this would eliminate the tax penalty for declining to purchase health coverage, a report Wednesday from the Congressional Budget Office showed it would lead to 13 million more people going without insurance over the next 10 years compared to the current system.
By lowering the number of people on the Obamacare exchanges, the government would pay out less in subsidies to help people pay insurance premiums. In the end, the CBO estimated this would add $338 billion in new revenue, which would more than fill the gap in the legislation.
Brady has been noncommittal about including the mandate repeal.
The Ways and Means Committee kicked off their last day of consideration of the TCJA on Thursday, and the bill is expected to be approved by the group sometime around noon.
If you've made an error on a tax return you already filed or simply come across new information, such as a tax deduction or credit you now realize you qualify for, file an amended tax return to make the correction. The Internal Revenue Service (IRS) knows the tax code is complex, and that people make mistakes. The process for filing an amendment is straightforward. Simply file Form 1040X, Amended Tax Return, along with the corrected or additional documents you did not originally file with your return.
Congress has passed the largest piece of tax reform legislation in more than three decades. The bill went into place on January 1, 2018, which means that it will affect the taxes of most taxpayers for the 2018 tax year.