Early last Friday morning (February 9th), the Bipartisan Budget Act of 2018, H.R.1892 became law after passing the Senate by a vote of 71–28 and the House of Representatives, 240–186 and being signed by President Donald Trump later in the day. The 640-page legislation contains many tax provisions, with Congress retroactively extending a number of tax provisions for one year so they were effective for 2017 only.
Obviously, due to the timing of these tax laws, not only does the IRS needs time to update their forms and instructions, but practitioners need to become well-versed in these changes to better serve their clients.
Some of the highlights for individual taxpayers include:
Mortgage Debt Exclusion – Unfortunately financial crisis can happen in your life that can’t be avoided. If you experienced a foreclosure, short sale, or loan modification, you may still be able to exclude the amount of debt forgiven on your principal residence from your taxable income on your 2017 taxes.
Mortgage Insurance Premiums – You may not have been happy about the mortgage insurance your lender required when you purchased your home, but you may be able to deduct the amount you paid for the mortgage insurance, which is considered interest for mortgage interest deduction purposes.
Tuition and Fees Deduction – College students or parents may still be able to deduct college expenses including tuition, books, and other supplies, up to $4,000 even if you only took one class. The deduction is capped at $4,000 for individuals with adjusted gross income (AGI) up to $65,000 ($130,000 for joint filers) and $2,000 for individuals with AGI up to $80,000 ($160,000 for joint filers).
Credit for Non-Business Energy Property – Homeowners who made energy efficient improvements to their homes like energy-saving roofs, windows, skylights, and doors will still be able to claim the Non-Business Energy Property credit for 10 percent of amounts paid for qualified energy efficiency improvements and 100 percent of amounts paid for qualified energy property like high-efficiency water heaters, air conditioning units, and furnaces for taxpayer’s principal residence.
Extension and modification of credit for Residential Energy Property – Extends and phases down the temporary components of residential energy property credit for fuel cells, distributed wind property, and geothermal heat pumps. This matches the extension and phases down for solar property that was provided for in the 2015 PATH Act.
Form 1040SR - available "only to individuals who have attained age 65 as of the close of the taxable year," even if they have to report Social Security benefits, distributions from annuities or retirement plans, interest or dividend payments, or capital gains and losses.
Details of the changes can be found below