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Budget Deal Revives Expired Individual Tax Breaks For Homeowners, Students And Environmentalists

By newadmin / Published on Friday, 09 Feb 2018 14:39 PM / No Comments / 9 views


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In the massive budget deal passed early this morning, Congress has bestowed surprise tax breaks on homeowners, students and greenies. There are tax breaks for mortgage insurance premiums, higher education expenses, energy-efficient home improvement projects and more. These were tax breaks that expired at the end of 2016, but are now back on for 2017—once President Donald Trump signs on, which is expected.

By reinstating individual tax breaks that didn’t make it into the December tax overhaul, Congress has returned to its practice of passing tax extenders—on-again, off-again tax laws—without regard to how its actions balloon deficits. (See The Senseless $15 Billion Tax Giveaway Buried In The Budget Deal.) The immediate good news for taxpayers: You could see additional tax savings on the tax return you’re filing now—for the 2017 tax year.

WASHINGTON, DC – FEBRUARY 09: Cars line up to pick up members of the House after the House voted to keep the government open on February 9, 2018 in Washington, DC. This morning the House passed a budget deal that would fund the government through March 23. (Photo by Mark Wilson/Getty Images)

Here are some of the individual provisions in the deal.

  • 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. For the estimated budget effects, click here.

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In the massive budget deal passed early this morning, Congress has bestowed surprise tax breaks on homeowners, students and greenies. There are tax breaks for mortgage insurance premiums, higher education expenses, energy-efficient home improvement projects and more. These were tax breaks that expired at the end of 2016, but are now back on for 2017—once President Donald Trump signs on, which is expected.

By reinstating individual tax breaks that didn’t make it into the December tax overhaul, Congress has returned to its practice of passing tax extenders—on-again, off-again tax laws—without regard to how its actions balloon deficits. (See The Senseless $15 Billion Tax Giveaway Buried In The Budget Deal.) The immediate good news for taxpayers: You could see additional tax savings on the tax return you’re filing now—for the 2017 tax year.

WASHINGTON, DC – FEBRUARY 09: Cars line up to pick up members of the House after the House voted to keep the government open on February 9, 2018 in Washington, DC. This morning the House passed a budget deal that would fund the government through March 23. (Photo by Mark Wilson/Getty Images)

Here are some of the individual provisions in the deal.

  • 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. For the estimated budget effects, click here.

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