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While accountants and preparers are still studying the massive changes to tax law in the Tax Cuts and Jobs Act (12/22/17), Congress slipped in another batch of changes, only this time the effects are retroactive to 1/1/17, and in most cases expire after 12/31/17.  No matter that these changes affect 2017 tax returns that we have already filed, and many more that we will file before the IRS decides how to implement these changes, and tax software providers can modify their software. Who wouldn't want to spend all summer amending returns because Congress can't amend 2017 tax law during 2017?
Many of these 2017 changes are to reinstate tax provisions that expire on 1/1/17, and Congress decided to extend them one more year, to 12/31/17.
 
Per Forbes, here are the surprise extenders that just passed:.

 

  • The ability to exclude a discharge of residential mortgage indebtedness from gross income. The provision also modifies the exclusion to apply to qualified principal residence indebtedness that's discharged pursuant to a binding written agreement entered into in 2017. Normally, taxpayers have to pay income taxes on forgiveness of debt.
  • The deduction for mortgage insurance premiums. This basically allows mortgage insurance premiums to be treated as deductible interest. So, this only helps you if you're itemizing deductions, and, under the December tax overhaul, far fewer taxpayers will be itemizing because of the increased standard deduction. Also, the deduction phases out for taxpayers with adjusted gross income of $100,000 to $110,000.
  • The above-the-line deduction of up to $4,000 for higher education expenses. That includes tuition and related expenses. You don't have to itemize to take this one. But the deduction is capped at $4,000 for an individual whose AGI doesn't exceed $65,000 ($130,000 for joint filers) or $2,000 for individuals whose AGI doesn't exceed $80,000 ($160,000 for joint filers).
  • The $500 energy-efficient home improvements tax credit. This one is listed under "energy" extenders but it affects homeowner's personal tax return. You can get a tax credit (that's a dollar for dollar reduction in your tax liability) of up to $500 (10% of the amount paid) for making energy-efficient home improvement like new windows or upgraded heating/a-c equipment.
  • The 2-wheel plug-in electric vehicle credit. Did you buy an electric motor bike in 2017? The 10% tax credit is back, capped at $2,500.
  • The geothermal residential energy tax credit. Home solar and small wind got extended in the last go round, but geothermal home energy systems were left out. Now that's fixed. For geothermal systems placed in service from Jan. 1, 2017 through 2020, the credit is 26%, and then it drops to 22% through 2022, of the cost of the system.

 

For a full list, see this Senate Finance Committee Summary of the Tax Extenders Agreement included in the Bipartisan Budget Act.


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