Ask the Editor: Are More Tax Changes Coming From Congress?

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Each week in our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter editor, answers questions on topics submitted by readers. This week, she's looking at four tax questions from readers on various tax proposals in Congress that taxpayers and preparers should keep an eye on this year and next. (Get a free issue of The Kiplinger Tax Letter or subscribe.)

1. Higher home-sale exclusions

Question: My wife and I have lived in our home for many years, and it has greatly appreciated in value since we bought it. If I sell now, my gain will be way above the current $500,000 gain exclusion for selling a home. I have heard that Congress is thinking of raising the gain exclusion cap for home sales. Do you think that will happen this year?

Joy Taylor: Since 1997, individuals who own and use a home as their primary residence for at least two of the five years before the sale can exclude from taxable income up to $250,000 of the gain. The exclusion is $500,000 for joint filers. These figures have never been adjusted for the appreciation in residential real estate during this tax break's 30-year history.

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2. Age-in-place home modifications

Question: My husband and I want to stay in our home during our golden years. So we are starting to add some age-in-place modifications to it. Will Congress ever give us a tax break for these changes?

Joy Taylor: A Senate proposal by Senators Angela Alsobrooks (D-MD) and Kirsten Gillibrand (D-NY) would do just that. The "Senior Accessible Housing Tax Credit Act of 2026" would give individuals age 60 and older a nonrefundable tax credit of up to $10,000 per year for the cost of specific home improvements. They include:

Widening doorways
Replacing toilets and faucets
Installing non-slip flooring
Putting in chair lifts and wheelchair ramps
Installing handrails and shower seats
Putting in furniture risers

The credit would begin to phase out at modified adjusted gross incomes (MAGI) of over $200,000 for joint filers and $100,000 for single filers.

The odds of passage this year are pretty slim, but we are definitely keeping a close eye on this idea because we expect it will come back again as the U.S. population continues to age.

3. IRS regulation of unenrolled preparers

Question: I am a tax return preparer. I am not a CPA, enrolled agent or lawyer. I heard that Congress wants to make it harder for me to get a preparer tax identification number (PTIN) each year. Can you explain exactly what Congress is proposing for tax return preparers?

Joy Taylor: Last month, the Senate Finance Committee approved a bipartisan bill called "The Taxpayer Assistance and Service Act" that has over 60 proposals covering 10 broad topics:

Tax administration and customer service
U.S. citizens who live abroad
Streamlining judicial review for filers who challenge IRS in court
Tax return preparers
IRS's Taxpayer Advocate's office
IRS's appeals office
Whistle-blowers
U.S. citizens held hostage overseas
Small businesses
Miscellaneous provisions

One of the secitons in this bill would let the IRS regulate unenrolled paid tax return preparers. An unenrolled preparer is someone who prepares tax returns for money, but is not a CPA, lawyer, enrolled agent or a comparable state-license holder.

Under the bill, unenrolled preparers would have to meet various requirements in order to apply for or renew a PTIN each year. These preparers must provide information about their competence and character, pass criminal background and tax compliance checks, and take up to 18 hours of continuing education courses. Importantly, the proposal does not require unenrolled preparers to pass a competency exam. Under the proposal, the IRS would be able to deny, revoke or suspend PTINs for unenrolled preparers who don't comply with the rules.

Giving the IRS power to regulate unenrolled preparers has been tried before. Since 2014, after an appeals court struck down the IRS's administrative oversight rules for unenrolled preparers, the IRS's National Taxpayer Advocate, Treasury inspectors, government auditors and tax practitioner groups have pleaded with Congress to let the IRS regulate unenrolled preparers. But this has always faced a wall of naysayers in the House and Senate, mainly Republicans, with added pressure from key free-market groups that oppose giving the IRS more statutory authority to regulate preparers.

But some tax professionals say this time could be different. The current language in the bipartisan Senate bill is more modest when compared with prior proposals. Democrats have made preparer oversight a top priority. And it is well documented that unenrolled preparers make more errors with their clients' refundable credits and certain other tax breaks, when compared with filers who do their own returns, CPAs, enrolled agents, attorneys, and volunteers with tax-filing assistance programs.

Maybe we will see Congress act on the Taxpayer Assistance and Service Act in the short time period after the mid-term elections and before lawmakers head home again for the Christmas holidays. There are many factors that will determine this, including which party comes out ahead in the mid-terms, other items on Congress's plate, and the determination of legislators to focus on taxes.

4. Losses from natural disasters

Question: My car was destroyed last fall in a flood that ended up being a federally declared disaster. I didn't have the car insured. I already filed my 2025 Form 1040 and didn't claim a disaster loss because I took the standard deduction. I heard that a new law retroactively allows disaster loss deductions for all of 2025 without having to itemize on Schedule A. What should I do to claim the loss?

Joy Taylor: Before the Senate left Washington, D.C., for its August recess, it approved a House-passed bill. We expect President Trump to sign this bill soon. The legislation provides easings for personal disaster loss write-offs identical to those given to victims of disasters in 2018 through July 4, 2025. The relief applies to losses incurred in federally declared disasters that begin before January 1, 2027. The IRS refers to these as "qualified disaster losses."

Individuals can deduct these disaster losses in excess of a $500 threshold without regard to the 10%-of-adjusted-gross-income offset that generally applies. The relief is available for filers who claim standard deductions and for individuals who itemize on Schedule A of Form 1040.

Since your disaster loss occurred last year after July 4, 2025, and you relied on the old tax rules when preparing your 2025 Form 1040, you can amend your return by filing Form 1040-X to take advantage of the new law.

About Ask the Editor, Tax Edition

Subscribers of The Kiplinger Tax Letter, The Kiplinger Letter and The Kiplinger Retirement Report can ask Joy questions about tax topics. You'll find full details of how to submit questions in each publication. Subscribe to The Kiplinger Tax Letter, The Kiplinger Letter or The Kiplinger Retirement Report.

We have already received many questions from readers on topics related to tax changes in the One Big Beautiful Bill, retirement accounts and more. We will continue to answer these in future Ask the Editor roundups. So keep those questions coming!

Disclaimer

Not all questions submitted will be published, and some may be condensed and/or combined with other similar questions and answers, as required editorially. The answers provided by our editors and experts, in this Q&A series, are for general informational purposes only. While we take reasonable precautions to ensure we provide accurate answers to your questions, this information does not, and is not intended to, constitute independent financial, legal, or tax advice. You should not act, or refrain from acting, based on any information provided in this feature. You should consult with a financial or tax advisor regarding any questions you may have in relation to the matters discussed in this article.