Another round of ‘extenders’

Congress just can’t help itself–some long-dead tax provisions have once again been resurrected. Generally speaking, they are taxpayer-positive measures.

President Trump signed the Further Consolidated Appropriations Act, 2020, a 715 page document that will keep the government open through September 2020, on 12/20/19. This appropriations bill includes tax cuts and new spending estimated to ‘cost’ $426 billion over 10 years.

turning the clock back

The former residential energy credits were resurrected from the tax credit ash heap, retroactive to 2018. Now set to expire after 2020, credits are again available for high-efficient furnaces, air conditioners, water heaters, insulation, doors and windows. They must be installed in your existing principal residence, and there is a lifetime (since 2005) limit of $500 on these credits. These are the same residential energy credits that had expired after 2017. The renewable energy and homebuilder credits are unaffected by this legislation.

Another item that may be beneficial to numerous individual taxpayers is the reduction of the floor for itemized medical deductions from 10% back to 7.5%, but only for 2019 and 2020. It had been at 7.5% from 1986 through 2013, then 10% from 2013-2016 (except those 65 and older), then back to 7.5% for 2017 & 2018. This seems to be an item tax writers find easy to toy with. Barring legislation in Des Moines this year, Iowa will have a 10% floor for medical deductions for 2019 taxes.

Most people can see the benefit of that tax break, in that it was restored before the tax increase took effect. Here’s a short list of some of the restored provisions that had expired after 2017, now reinstated though 2020, retroactive to 2018:

  • Exclusion from income for certain debt discharges for qualified residence debt
  • Ability to deduct certain mortgage insurance premiums as qualified residence interest
  • The above the line tuition and fees deduction has returned

In order to claim any of these changes for 2018, an amended return must be filed.

Another part of the bill extends the employer’s credit for certain family and medical leave expenses, previously scheduled to expire in 2019, through 2020.

Our friends at Iowa State University’s Center for Agricultural Law and Taxation have more details on this new legislation.

Leave a Reply