May 2020

They're Back!

Theyre Back

A basketful of tax breaks that either expired last year or were scheduled to end before 2020 have been brought back to life, courtesy of Congress. Lawmakers packed end-of-year appropriation bills with these extenders.


MORTGAGE INSURANCE
If you qualify by income, you may be able to deduct mortgage insurance premiums for your principal residence on your tax return.


DEBT TREATMENT
Homeowners who met eligibility requirements were allowed to exclude mortgage debt cancellation from income on their tax returns from 2007-2017, and Congress now allows this type of debt cancellation to remain tax-free from 2018 through 2020.


HEALTH COSTS
Scheduled to rise from 7.5% of adjusted gross income to 10% in 2020, Congress moved to keep the itemized medical expense deduction threshold at the lower percentage for costs that were not reimbursed. Most medical costs that are not cosmetic, including prescription drugs, dental work and vision, qualify for the deduction.


DISASTER RELIEF
Congress gave some taxpayers who experienced federally declared disasters as far back as 2018 the ability to take penalty-free withdrawals from their retirement plans. Employers who continue paying employees during a disaster will also receive favored tax treatment on the amount of wages paid during this period.


COLLEGE DEDUCTION
Remember when Congress ditched the tax deduction for qualified college expenses? Never mind, it’s back at least through tax year 2020, with the repeal retroactive to 2018. To qualify, your adjusted gross income needs to fall under certain thresholds.


FOR THE ENVIRONMENT
Energy-efficient taxpayers are winners with a handful of extensions giving them continued favorable tax treatment. Alternative fuel refueling equipment, fuel cell vehicles and electric motorcycles will have their tax credits extended through 2020, retroactive to 2018 for some of them. Also, take a tax credit up to $500 for making energy-saving improvements to a principal residence through 2020, retroactive to 2018.


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