The 104th Congress passed significant legislation affecting individual taxpayers, primarily through the Health Coverage Availability and Affordability Act and the Small Business Job Protection Act.
Key Provisions
- Long-Term Care: Premiums for qualified long-term care insurance are now treated as deductible medical expenses (subject to the 7.5% AGI floor). Benefits received are generally tax-free.
- IRA Withdrawals: Penalty-free withdrawals are now allowed for medical expenses exceeding 7.5% of AGI, and for health insurance premiums if you are unemployed for at least 12 weeks.
- Adoption Credit: A tax credit of up to $5,000 per child ($6,000 for special needs) is available for qualified adoption expenses. This phases out for AGIs between $75,000 and $115,000.
- Punitive Damages: All punitive damages and damages for non-physical injuries (like emotional distress) are now taxable.
- State Tuition Plans: Qualified state tuition programs are now tax-exempt, and distributions used for higher education are taxed at the student's rate.