Surprise, surprise! Just when many thought we are done with tax reform after the passing of the 2017 tax law last December, here comes another revision in February. What makes this revision even more tricky is it happened in the middle of the tax season with some already their 2017 returns. Don’t worry though as 7M has you covered when such sudden changes happen and will go an extra length to let you know if it impacts those who have already filed with us.
The Bipartisan Budget Act of 2018 (BBA) funds the federal government through March 23 while extending more than 30 expired tax provisions. Some of the noticeable tax breaks extended include:
• Tuition deduction: Normally claimed in lieu of a higher education credit, the credit could be either $4,000 or $2,000, depending on modified adjusted gross income (MAGI). This is an above-the-line deduction subject to MAGI now available on 2017 returns.
• 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.
• Mortgage debt forgiveness: Discharge of qualified mortgage debt 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.
• 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: 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: 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.
While these are just a few of the provisions, it is important to make sure you are aware of the other provisions in this bill as they could impact your personal or business tax return. If you have already filed, we can help you file an amended return to take advantage of these tax breaks.
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