Wait! You Might Be Able to Deduct That!

On December 20, 2019, President Trump signed into law a federal government spending package that does more than just fund the government. It extends certain income tax provisions that had already expired or that were due to expire at the end of 2019.

The “Further Consolidated Appropriations Act, 2020,” included–among other things–the “Taxpayer Certainty and Disaster Tax Relief Act of 2019” (the “Disaster Act”) which includes an extension of more than 30 tax provisions–most through 2020, and some retroactive back to 2018.  The agreement on the spending package also includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act.

The Disaster Act resurrects some popular tax provisions and deductions — to include:

  • Mortgage Insurance Premium Deduction – The provision expired, but may be renewed retroactively for 2017.
  • Qualified Tuition and Related Expenses Deduction – Claiming an above-the-line deduction for qualifying expenses — without having to itemize (but not if you already claimed a credit for these expenses).
  • Cancellation of Debt – The exclusion from gross income of discharge of qualified principal residence indebtedness before January 1, 2021.
  • Work Opportunity Tax Credit – for employers who hire economically challenged workers.

The extension of some breaks that had expired at the end of 2017 but that now have been retroactively revived could mean that some taxpayers might find it worth their while to file an amended return for 2018 — if the tax savings exceed the cost to prepare the amended return. We would be happy to discuss with you whether a 2018 amended return would be necessary and in your best interests.

The SECURE Act is primarily intended to encourage saving for retirement — though it’s not entirely favorable to taxpayers.  Most provisions take effect January 1, 2020.  Some of the most significant provisions:

  • Increasing the age at which taxpayers must begin taking required minimum distributions (RMDs) from 70½ to 72 (for individuals turning 70½ after 12/31/2019)
  • Elimination of the age 70½ limit for making traditional IRA contibutions, so that anyone can contribute as long as they’re working, matching the existing rules for 401(k) plans and Roth IRAs
  • Eliminates the “stretch IRA” (when an individual designated beneficiary could extend post-death required minimum distributions over his lifetime), and replaces it with a 10-year payout for non-spousal beneficiaries

This is just a brief overview of some of the most relevant provisions.  If you would like to discuss these and other changes that may affect you, give us a call.

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