Oops, they did it again! (Not what I really wanted to say! Fill in your favorite cuss word here!)
Today, February 9, 2018 the Bipartisan Budget Act of 2018 (BBA) was signed into law after lawmakers stayed up all night to work on the bill (poor babies).
Shutdown averted, I hope. The issue for me and my clients right now is that the BBA retroactively brought back some tax extenders for 2017. That’s right, we’ve been filing returns for 2 weeks now and our elected officials just changed the rules on those returns. FUN! (Dripping with sarcasm!)
What are tax extenders? Because of government budgetary rules, many of our tax changes can run for only a set number of years before they revert to what the previous law was. For them to continue, Congress has to extend them. This should be done before they run out so that the Internal Revenue Service (IRS) can get the forms changed before the tax season starts. Occasionally, the extensions haven’t come until the new year and certain deductions and credits were delayed. But it’s never taken 6 weeks to find out we are getting the extenders back. That will cause more amended returns this year.
There are over 40 changes but here are the main ones that might affect my clients 2017 returns:
- Discharge of indebtedness on a principle residence.
- Mortgage insurance premiums (PMI) are deductible again.
- Above the line tuition deduction.
- Non-business energy deduction.
- Changes to installment agreement requirements.
Right now I am racking my brain to remember who I talked to a few days ago about not being able to take the energy credit for insulation. They might be able to now. And I will be dealing with corrected 1098 mortgage statements for months. Mostly from clients who don’t itemize but thinks this means will mean they can. So far, I haven’t seen a 1098 that even mentioned PMI and I know I had several clients last year who qualified for the deduction last year.
There is also a new tax form, 1040SR. It will be like the 1040EZ for taxpayers over 65 with no limit on the amount of income. Income sources can include pensions/annuities, interest, dividends and Capital Gains. I’m going to assume that the new form is supposed to simplify preparing the return but they still have to calculate the capital gains tax which is not a simple calculation. Seems to me it’s more for show. If I’m reading it correctly, Form 1040SR will not go into effect until 2019 tax returns. The official wording is:
This provision is effective for taxable years beginning after date of enactment.
More coming when I get more info.