The Bipartisan Budget Act of 2018 (BBA) is a spending bill drafted and passed on February 9, 2018 to prevent a federal government shutdown.
While the BBA largely covers federal spending, it does prolong some tax breaks and includes tax provisions that were not in the Tax Cuts and Jobs Act. Here are 10 tax items worth noting:
1. Mortgage insurance premiums
The Budget Act extends the treatment of mortgage insurance premiums as qualified residence interest to premiums paid or accrued in 2017. This is effective for any amounts paid or accrued after December 31, 2016
2. Tuition & fees deduction
The above-the line deduction for qualified tuition and related expenses is extended to tax years beginning after December 31, 2016.
You may be able to deduct qualified higher education expenses paid during the tax year for yourself, your spouse, or your dependent.
The maximum deduction is $4,000 and is taken as an adjustment to income, meaning you can claim it without having to itemize your deductions.
3. New tax form for seniors
A simplified tax form will be created for individuals who are 65 or older, titled Form 1040SR. The form will be similar to Form 1040EZ.
Taxpayers can use this form even if their income includes Social Security benefits, distributions from qualified retirement plans, annuities, interest and dividends, or capital gains and losses. There are no income limitations to use this form. It’s unknown when this form will be available.
4. Motor vehicles
The BBA continues the credit for qualified fuel cell motor vehichles. The credit is $4,000 for a vehicle weighing up to 8,500 pounds and ranges from $10,000 to $40,000 for heavier vehicles.
5. Discharge qualified principal residence indebtedness
The election to exclude the discharge of qualified principal residence indebtedness from gross income is extended.
6. Energy credit
The 10% credit for qualified nonbusiness energy property is extended to property that was placed in service in 2017.
7. Energy efficient home credit
The credit for new, energy efficient homes is extended through 2017 for homes acquired after December 31, 2016. The credit can be $2,000 if the home meets the 50% energy efficient standard or $1,000 if the home meets the 30% energy efficient standard.
8. Solar & thermal energy property
The Budget Act extends solar and geothermal energy property to include property that is constructed between 2017 and 2021. Construction must begin in 2017.
9. Energy efficient deduction
The deduction for energy efficient consumer buildings is extended to property that was placed in service in 2017.
10. Charitable contributions for disaster relief efforts
Any cash contributions made between October 8, 2017 and December 31, 2018 for California wildfire disaster relief efforts are excluded from applicable charitable contribution limits.
Your charitable contribution deduction generally can’t be more than 50% of your adjusted gross income, but sometimes, 20% and 30% limits apply. Your contributions made for relief efforts are not subject to these limits or the overall limit on itemized deductions.
Contributions are also eligible for carryover treatment if they exceed this limitation. For corporations, the deduction is limited to the 10% of taxable income. Again, contributions are eligible for carryover if they exceed this limitation.
While the impact of these provisions may be small in comparison to the Tax Cuts and Jobs Act, they’re worth reviewing for your 2017 tax return and future returns to ensure you are maximizing your tax savings.
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