Almost two weeks into the 2017 tax filing season, and we get this news bomb laid on us….This morning, in order to avoid another Government shutdown, President Trump signed a budget bill which retroactively extends a few tax laws that had expired for 2017. If you have already filed your tax return, you might need to file an amended tax return to claim some of these deductions.

The most notable changes include:

Exclusion for discharge of indebtedness on a principal residence
The provision extends the exclusion from gross income of a discharge of qualified principal residence indebtedness through 2017. The provision also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged pursuant to a binding written agreement entered into in 2017.

Premiums for mortgage insurance (PMI) deductible as mortgage interest
The provision extends the treatment of qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction through 2017. This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000.

Above-the-line deduction for qualified tuition and related expenses
The provision extends the above-the-line deduction for qualified tuition and related expenses for higher education through 2017. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).

Three-year depreciation for race horses 2-years-old or younger
The provision extends the 3-year recovery period for race horses to property placed in service during 2017.

Also incorporated into the bill is a series of additional provisions that will go into effect for the 2018 tax year. The following are noteworthy:

Requirement for new Form 1040SR for seniors
The provision requires that the IRS publish a simplified income tax return form, designated a Form 1040SR, for use by persons who are age 65 or older by the close of the taxable year. The form is to be as similar as possible to the Form 1040EZ. The use of Form 1040SR is not to be restricted based on the amount of taxable income to be shown on the return, or the fact that the income to be reported for the taxable year includes social security benefits, distributions from qualified retirement plans, annuities or other such deferred payment arrangements, interest and dividends, or capital gains and losses taken into account in determining adjusted net capital gain. This provision is effective for taxable years beginning after the date of enactment.

Prohibition of modifying user fee requirements for installment agreements
The provision prohibits increases in the amount of user fees charged by the IRS for installment agreements. In addition, the IRS is required to waive the fees imposed for installment agreements for taxpayers whose income falls below 250 percent of the poverty line and have agreed to make the payments by electronic means through a debit account. Further, for those taxpayers whose income falls below 250 percent of the poverty line, are unbanked, and successfully complete an installment agreement, the fee would be reimbursed at the end of the installment agreement period.

Individuals held harmless on improper levy on retirement plans
The provision allows amounts, including interest, returned to an individual from the IRS pursuant to a levy to be contributed to the IRA, or employer-sponsored plan, without regard to normal contribution limits. In addition, the IRS is required to pay interest on an amount returned. The provision is effective for levied amounts, and interest thereon, returned to individuals in taxable years beginning after December 31, 2017.

Hammernik & Associates is here to keep up with the tax law changes to make sure you receive the proper deductions and credits. Please contact us if there was something extended that applies to you, and you need to amend a tax return.

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