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New Budget Deal Includes Many Tax Extenders That Had Recently Expired.

by
Sonu Shukla
on
2/12/2018
New Budget Deal Includes Many Tax Extenders That Had Recently Expired.

If you haven't been paying attention to what's been happening in Congress, it's time to take note: the latest budget legislation has revived a lot of tax breaks that had officially expired on December 31, 2016, and made them retroactively applicable to all of 2017. There's an official name for this type of action - it's known as a tax extender - and they're becoming increasingly common in the face of the general inability to reach consensus on much of anything, let alone tax write-offs and benefits. Many of these retroactive tax breaks are suspiciously beneficial for groups that have lots of money and lobbying power, and as a result, there has been a fair amount of grumbling in the House of Representatives, where Republicans tend to be more fiscally conservative. But their colleagues in the Senate are more amenable, and they definitely offer lawmakers an attractive alternative to passing new laws: they provide a way to camouflage the additional expenses that they represent - which the nonpartisan Joint Committee on Taxation says comes to $17.4 billion over the next ten years.

So what are the tax extenders included in the new legislation?

1. Taxpayers will be able to exclude a discharge of residential mortgage acquisition debt from their gross income Though taxpayers usually have a tax liability on forgiveness of debt as income, the provision eliminates that, as well as changing an exclusion of qualified principal residence debt that's been discharged if it involves a binding written agreement from the tax year 2017.

2. Taxpayers with up to $15 million in expenses for theatrical productions, as well as film and television productions, will again be allowed to apply previously existing expensing rules for tax year 2017.

3. Taxpayers who are brewers will see an easing of inventory rules. Additionally, the legislature has requested a clarification on regulations dealing with a unified accounting system for tax paid and non-tax paid beer from the Treasury Department.

4. A previously existing increase on the limit on cover-over of rum excise taxes for the U.S. Virgin Islands and Puerto Rico will be extended.

5. Taxpayers who purchase mortgage insurance and who itemize will be allowed to write off their premium payments as deductible interest. This change will likely affect fewer people than it would have starting in 2018, as the new tax law's increase on the income level for the standard deduction is expected to reduce the number of taxpayers that will be itemizing. The deduction has an adjusted gross income phase-out of between $100,000 and $110,000.

6. The deduction for higher education expenses, including tuition and related expenses. This deduction, which is capped at $4,000 for individual taxpayers with Adjusted Gross Income that doesn't exceed $65,000 (and joint filers with an AGI that doesn't exceed $130,000) is available whether the taxpayer itemizes or not. For those who earn between the lower threshold and $80,000 (or $160,000 for joint filers), the maximum deduction is $2,000.

7. The tax credit for energy-efficient home improvements > This $500 credit applies to a homeowner's individual tax return and provides a dollar-for-dollar credit on 10% of the amount paid for energy-efficient home improvements up to $500. Eligible improvements include new or air conditioning systems and new windows.

8. The tax credit for purchasing an electric motorbike > Taxpayers who purchased an electric motorbike in 2017 will once again be eligible for a 10% tax credit on their purchase, up to a maximum of $2,500.

9. The tax credit for geothermal home energy systems If you purchased a geothermal energy system for your residence, between January 1, 2017, and going through December 31, 2020, a credit of 26% of the cost of the system has been restored and will remain in place but drop to 22% between January 1, 2021, and the end of 2022. These changes and others created by the Tax Cuts and Jobs Act will be reflected soon in the IRS guidelines.

If you have questions regarding how any of these will impact your personal tax liability, contact a tax professional to set up a consultation. Sonu Shukla, CPA writes for TaxBuzz, a tax news, and advice website. Reach his office at [email protected].

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Sonu Shukla

Sonu Shukla

Sonu Shukla is a CPA, accountant, and tax preparer based in Orlando, FL. Sonu Shukla can assist you with your tax preparation and planning needs. Sonu is more than just another accountant in Orlando, Florida; he is a small business owner himself. It is a position in life that grants him the perspective and insight to emphasize with his clients, bringing them the best service possible. A Certified Public Accountant and a Certified Financial Planner, Sonu possesses the skills, education and experience to demonstrate unerring business acumen and passionately planned financial strategies. Being proactive is key for Sonu, tailoring highly efficient tax plans for his small business clients, all in a one on one environment where he and the client can bounce ideas around until every detail is worked out.

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