Individual Tax Provisions Included Within the Recent Budget Deal

On February 9, 2018, Congress passed and the President signed into law, the “Bipartisan Budget Act of 2018.”  Included in the act are several tax provisions, including “extenders” for individuals, which affect the 2017 tax year.  These “extenders” are:

        1. Exclusion for discharge of indebtedness on a principal residence:  Normally, a discharge of indebtedness is considered taxable income to the borrower.  This provision, which is now extended through agreements entered into before January 1, 2018, permits a taxpayer to exclude the discharge that pertains to qualified principal residence indebtedness.

       2. Treatment of mortgage insurance premiums as deductible qualified residence interest: This provision permits mortgage insurance premiums to be treated as mortgage interest on a qualified personal residence.  The deduction for mortgage insurance premiums begins to phase out for taxpayers with adjusted gross incomes (AGIs) exceeding $100,000 ($50,000 in the case of a married individual filing a separate return).

       3. Deduction for qualified tuition and related expenses: An “above-the-line” deduction is available to taxpayers with qualified higher education expenses.  The deduction is capped at $4,000 for taxpayers who have an AGI less than $65,000 ($130,000 for married taxpayers filing jointly) or $2,000 for individuals who have AGIs not exceeding $80,000 ($160,000 for joint filers).

      4. Tax credit for nonbusiness energy property:  A tax credit is available, up to $500, for homeowner’s who make certain energy-efficient improvements to their homes.  The credit is based on 10% of the project cost and includes such improvements as new windows and doors, heating and cooling units, and insulation materials, provided that the improvement meets specific energy rating requirements.  The $500 limitation applies to the lifetime of the taxpayer.

If you have any questions on this law change, or others, please contact us today to schedule an appointment.