In the closing days of 2019, Congress surprised taxpayers with a long-delayed Extender’s Bill. The bill extended a number of popular deductions and credits covering a range of expenses, including mortgage, medical and tuition. Many have been around since 1997 and extended a year or two at a time ever since. In this bill, though, Congress not only extended them through the 2020 tax year, but also made them retroactive for the 2018 tax year.
For those who qualify, that’s great news. It means you can claim them when you file your 2019 taxes in April, but you can also claim them next year as well. On top of that, you can also claim these deductions and credits for 2018 by filing an amended return if you’ve already filed for 2018. Let’s take a look at just what these deductions and credits are:
Mortgage Debt. If you entered into a foreclosure between 12/31/2017 and 12/31/2020 up to $2MM of mortgage debt on a Form 1099-C is exempt from taxes. You must also complete Form 982, Part I, Lines 1e and 2 and include it with your tax return.
Mortgage Insurance premiums. If you itemize deductions, the mortgage insurance premiums you paid between 1/1/2018 and 12/31/2020, can be deducted as mortgage interest. This phases out for taxpayers with an Adjusted Gross Income above $100,000 ($50,000 for Married Filing Single).
Medical floor. Between 1/1/2018 and 12/31/2020, the amount of Adjusted Gross Income that is subtracted from your itemized medical expenses remains at 7.5%. It had been scheduled to rise to 10% on 1/1/2020, so this is a nice break for those who qualify.
Qualified tuition expenses. For tuition and related expenses paid between 1/1/2018 and 12/31/2020, you can claim up to $4,000 for AGI up to $65,000 ($130,000 if Married Filing Jointly) or up to $2,000 for AGI between $65,000 - $80,000 (between $130,000 - $160,000 Married Filing Jointly) for each year. If you claim this deduction, however, you cannot also claim an Education Credit (American Opportunity or Lifetime Learning Credit).
Nonbusiness Energy Credit. You can get a 10% credit for the money you spent between 1/1/2018 and 12/31/2020 for making your home’s windows, doors, skylights, and roof more energy efficient, up to $300 in total. The credit is a fixed dollar amount from $50 to $300 for specific energy-efficient improvements, including furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans. The lifetime maximum credit is $500.
Some of these deductions and credits are pretty generous, and the fact that they’re retroactive to 2018 could mean a real difference in your 2018 and 2019 tax bills. It’s not often taxpayers get an opportunity like this, so it’s important to review your tax returns for both years to see if you qualify.
It’s a nice surprise, so make sure to keep it in mind.