As part of the Tax Extender and Disaster Relief Act that was passed right at the end of 2019, many historical tax incentives that were not extended under the Tax Cuts and Jobs Act of 2017 have been extended through the 2020 filing season. This includes allowing individuals the ability to amend their 2018 Income Tax Return to take advantage of these changes. Below are some of the more common tax incentives that are back:
- Medical Expense Deduction: Under the Tax Cuts and Jobs Act of 2017, the floor threshold to get any benefit for medical expenses was set to go up to 10% for 2019 but with the recent changes, the floor threshold will stay at 7.5%. Therefore, you can deduct any medical expenses in excess of 7.5% of adjusted gross income as an itemized deduction.
- Credit for non-business energy property: If you made qualified energy efficient improvements to your home, you could be entitled to up to 10% of the cost for those improvements made to windows, doors, skylights and roofs to your principal residence. For other energy efficient improvements including furnace, boilers, heat pumps, water heaters, central air conditioning and fans have fixed dollar credits ranging from $50-300, with a $500 lifetime cap.
- Qualified Tuition and Related Expenses Deduction: This allows taxpayers to claim an above the line deduction up to $4,000 for qualified tuition and related expenses without having to itemize. This deduction is available to taxpayers whose Modified Adjusted Gross Income (MAGI) is less than $80,000 for individual taxpayers and $160,000 for those filing a joint return. The credit for qualified tuition and related expenses is also still available.
- Mortgage Insurance Premium (PMI) Deduction: Mortgage interest premiums paid are deductible as an itemized deduction on Schedule A. This deduction phases out for taxpayers with adjusted gross income over $100,000.
- Disaster Tax Relief: Benefits are provided to individuals and businesses affected by major disasters. Some benefits would include special rules allowing access to retirement funds, suspension of limits for certain charitable contributions, and special rules for deductions for disaster-related personal casualty losses.
This is a sampling of some of the tax extenders that were passed. If you are curious about the possibility of other tax incentives, a member of our tax services team can assist.