While the newest GOP tax reform bill starting tax year 2018 has been making headlines everywhere, you may have missed the tax code changes that can affect your 2017 return.
Expired Deductions and Credits
(Update: Congress retroactively extended these first four deductions and credits through 2017 in a budget bill on February 9, 2018. The medical expense changes remain the same.)
Tax-free Treatment for Forgiven Mortgage Debt
For federal income tax purposes, a forgiven debt generally counts as taxable Cancellation of Debt (COD) income. A temporary exception applied to COD income from cancelled mortgage debt that was used to acquire a principal residence. This is no longer an exception.
Mortgage Insurance Premium Deduction
Premiums for qualified mortgage insurance on debt to acquire, construct, or improve a first or second residence will no longer be deductible.
Qualified Tuition and Fees Deduction
The above-the-line (for AGI) deduction for qualified tuition and related expenses expired at the end of 2016. The American Opportunity and Lifetime Learning Credits are still available.
Residential Energy Efficiency and Residential Renewable Energy Tax Credits
In past years, taxpayers could claim up to $500 for certain energy-saving improvements to a principal residence. The credit generally equaled 10% of eligible costs for energy efficient insulation, windows, doors and roofs, plus 100% of eligible costs for energy efficient heating and cooling equipment, subject to the $500 lifetime cap (with no more than $200 from windows and skylights). These tax breaks expired at the end of 2016. The Solar Investment Tax Credit remains but begins to phase out at the end of 2019.
The 10% of AGI threshold for deducting medical expenses was removed. For tax years 2017 and 2018, medical expenditures in excess of 7.5% of AGI will be deductible. For tax year 2019 the 10% threshold is reinstated.
New for Tax Year 2017
Standard Mileage Rate
The standard mileage rate for the cost of operating your car for business is 53.5 cents a mile (Please note that in addition to mileage you are also allowed to deduct tolls, parking, property taxes and interest). The standard mileage rate allowed for the use of your car for medical purposes is 17 cents a mile and the standard mileage rate for the use of your car for volunteer services for a charity is 14 cents a mile for the entirety of 2017.
IRA and Retirement Account Contributions
The annual contribution limit for both Roth and Traditional IRAs remains at $5,500 ($1,000 additional if age 50 or older) for 2017 and 2018. Contributions to 401(k) and similar retirement plans remain at $18,000 ($6,000 additional if age 50 or older) for 2017 and will increase to $18,500 for 2018 with the same additional amount. Self-Employment Pension Plan (SEP) maximum contributions remain at $54,000 for 2017 and 2018.
Health Savings Accounts (HSAs) Contributions
The maximum HSA contribution increased to $3,400 ($6,750 for family coverage), with an additional $1,000 allowed if age 55 or older. Please note that you have until April 17, 2018 to contribute to your HSA for a 2017 deduction.
Other Items to Note
Need a Copy of Your Previous Return?
You can obtain a record of your past tax returns and other tax documents. IRS transcripts are often used to validate income and tax filing status for mortgage applications, student and small business loan applications, and during tax preparation. You can obtain them directly from the IRS using their Get Transcript online service.
Charitable deductions must be supported by documentation for every $1.00 you claim. For donations over $250.00, documentation must be obtained from the charity. The IRS has been auditing Non-Cash Contributions. We will only include non-cash contributions on your tax return if a worksheet is prepared. A worksheet is attached here.
The IRS will begin accepting returns on January 29, 2018. Schedule early. Our calendar fills up fast as people begin to receive their W-2s. Take the stress out of filing by scheduling as soon as you have your documents together. Leave yourself time before the April 17th deadline to catch and sort out any issues that arise. By scheduling with us and filing earlier, you get your refund faster or have more time to pay what you owe, and help protect any refund from identity thieves.