4 tax breaks you might get back if Congress reinstates deductions

Personal finance

Julie Thurston | Getty Images

Lawmakers are taking steps to renew a package of tax breaks, potentially making a slew of expired deductions available once more.

The so-called tax extenders are a series of temporary provisions in the code that have expired and must be cleared by Congress retroactively each year in order for filers to claim them.

Those breaks cover a variety of measures, including a deduction for qualified tuition expenses and credits for two-wheeled electric vehicles.

On Tuesday, Rep. Mike Thompson, D-Calif., proposed the Taxpayer Certainty and Disaster Relief Act, which would extend a number of expired provisions through 2020.

The bill will be marked up by the House Ways and Means Committee on Thursday.

Elected officials hit an impasse over the federal shutdown and other battles this spring, so the extenders weren’t approved in time for the 2018 tax filing deadline of April 15.

That meant that people who would have otherwise been eligible for these deductions and credits couldn’t claim them.

If Congress were to pass a measure allowing the extenders, taxpayers would have to file an amended return for 2018 to take those breaks, said Nicole Kaeding, director of federal projects at the Tax Foundation.

Expect a continued fight in Congress.

“We’ll see what happens in the House, but in the Senate, there’s no chance of it being enacted as written,” said Mark Mazur, director of the Urban-Brookings Tax Policy Center.

Here are 4 tax breaks that you might get back if Congress reinstates the extenders.

Medical deductions

In this Tuesday, Aug. 4, 2015 file photo, a nurse places a patient’s medication on an intravenous stand at a hospital in Philadelphia.

AP Photo | Matt Rourke

Under the Tax Cuts and Jobs Act, taxpayers were able to deduct qualifying medical expenses that exceed 7.5% of their 2018 adjusted gross income.

That provision was supposed to expire at the end of last year, resulting in the threshold rising to 10% of AGI.

This package of extenders would keep the medical cost threshold at 7.5% of AGI through the end of 2020.

Debt forgiveness on foreclosure

A sold sign is seen in front of a recently purchased home December 28, 2006 in San Francisco.

Justin Sullivan | Getty Images News | Getty Images

Let’s say your home was foreclosed or you got rid of your dwelling in a short-sale (where your lender accepts less than you owe.)

If your lender canceled or forgave the loan on your principal residence, there’s a tax extender that allows you to exclude up to $2 million (if married) from your gross income for discharge of the debt.

Normally, the canceled debt is treated as income and subject to taxes, but this break offers some relief.

The proposal extends this break, applying it to debt discharges occurring before Jan. 1, 2021.

Tuition and fees

Sidekick | Getty Images

If you have a child in college, you might be able to deduct up to $4,000 a year in higher-education tuition costs and other expenses.

This is an above-the-line deduction, so you don’t have to itemize to get it.

Ways and Means’s new bill proposes extending the break to the end of 2020.

Mortgage insurance

PeopleImages | E+ | Getty Images

Products You May Like

Articles You May Like

Why these investors might face a surprise tax bill around the corner
Pollster: ‘Mike Bloomberg has more money than God,’ so he can be a 2020 contender any time
Fed Governor Lael Brainard: says the central bank needs to guard against climate change
Here’s everything you need to know about your 2020 taxes
Everything Jim Cramer said on ‘Mad Money,’ including HP and Xerox bid, CVS CEO, Uber versus Lyft

Leave a Reply

Your email address will not be published. Required fields are marked *