Skip to main content

Bipartisan Budget Act Extends 30 Tax Provisions

With all the clamor over the massive new Tax Cuts and Jobs Act (TCJA), little attention was paid last year to the group of tax provisions, known as “extenders.” that had expired after 2016. Now the new temporary budget agreement worked out by Congress ...

tax deductions 1  561174d240184

With all the clamor over the massive new Tax Cuts and Jobs Act (TCJA), little attention was paid last year to the group of tax provisions, known as “extenders” that had expired after 2016. Now the new temporary budget agreement worked out by Congress restores certain extenders retroactively –but generally only for one year.

Specifically, the Bipartisan Budget Act of 2018 (BBA) funds the federal government through March 23 while extending more than 30 expired tax provisions. Many of the extenders are esoteric or targeted to specific industries – such as three three-year depreciation for racehorses two years old or younger – but the following tax breaks may affect some of your individual clients:

Mortgage debt forgiveness: Previously, a discharge of qualified mortgage debt was excluded from federal income tax, up to a limit of $2 million. The tax exclusion is applied to 2017 retroactively, but expires again in 2018.

Mortgage insurance premiums: This provision allows taxpayers to deduct mortgage insurance premiums, subject to a phase-out beginning at $100,000 of adjusted gross income (AGI). The deduction is extended for 2017 only.

Tuition deduction: The tuition-and-fees deduction, which may be claimed in lieu of a higher education credit, was subject to a phase-out based on modified adjusted gross income (MAGI). The credit could be either $4,000 or $2,000, depending on MAGI, until the phase-out was complete. This above-the-line deduction is available on 2017 returns, but not thereafter.

Residential energy credit: The latest version of the residential energy credit was available for 10% of the cost of qualified expenses, but was capped at $500 for a taxpayer’s lifetime (with no more than $200 from windows and skylights), The credit is revived for 2017 returns.

Energy-efficient property: Under prior law, you could claim a tax credit for certain residential energy efficient property, such as solar electric property or solar water heating property. The credit, based on a percentage decreasing from 30% to 22%, is extended retroactive to 2017 and through 2021.

Plug-in vehicles: Prior to the BBA, a taxpayer could take a 10% credit for credit for certain electric powered two- or three-wheeled vehicles manufactured primarily for use on public streets, roads and highways, up to a maximum of $2,000. This credit is preserved for 2017.

Empowerment zones:  Businesses and individual residents within designated empowerment zones were eligible for special tax incentives such as a 20% wage credit, liberalized Section 179 expensing, tax-exempt bond financing and deferral of capital gains tax on the sale of qualified assets sold and replaced. The BBA extends these tax breaks for 2017 only.

Generally, clients have until April 17, 2018 to claim these tax breaks on their 2017 returns. If a client has already filed their ’17 return, an amended return may be warranted.