Here in the middle of tax season, most Americans are working hard to get their 2019 returns prepared. Yet thanks to some better-late-than-never action from Washington, some tax breaks that many had given up for dead are suddenly back and better than ever -- and in an unusual move, they got reinstated retroactively back to the 2018 tax year.
As you're getting your 2019 taxes done, you'll want to look at these four tax breaks to see if you can benefit from them this year. Moreover, if you would've qualified last year, you might need to file an amended return in order to get some more money back from the IRS. Below, we'll look at how these four provisions finally got put back in the tax code and help you figure out if you can claim them.
What happened?
The four tax breaks below are all provisions that lawmakers initially established for only a short period of time. Instead of making a permanent provision, these tax extender provisions typically got extended toward the end of every year.
Image source: Getty Images.
However, at the end of 2018, these extenders went unextended -- and as 2019 went on, hopes that they'd come back dwindled. It was only the passage of a tax extender bill in December 2019 that restored these provisions, with lawmakers agreeing that it made sense to let taxpayers go back and claim them for 2018, as well, even though those returns had long since been filed.
Here's more on the four tax breaks in question.
1. Tuition and fees deduction
The tuition and fees deduction offers a deduction of up to $4,000 for qualifying educational expenses like tuition and required fees and materials. This tax break doesn't get claimed all that often because other educational tax breaks, like the American Opportunity and Lifetime Learning credits, tend to offer larger tax benefits.
However, because this deduction has a more generous income restriction, higher-income taxpayers are able to claim it, even if they're not eligible for the credits. The full $4,000 break is available for those with incomes of $65,000 or less for singles, or $130,000 or less for joint filers.
2. Deduction for private mortgage insurance
Another break for taxpayers involved the allowance of deductions for homeowners who had to pay for private mortgage insurance. Under the provision, homeowners could treat PMI the same way they did mortgage interest on their primary residence. To claim the PMI deduction, though, you had to itemize your deductions.
The higher standard deductions under tax reform for 2018 caused a lot of people who used to itemize to choose, instead, to take the standard deduction. Nevertheless, if you bought your house with less than a 20% down payment, then you may have been able to benefit by including those PMI costs among your deductions.
3. Deduction for mortgage debt forgiveness
Many people have had their mortgage debt forgiven if they sold their homes for less than their outstanding loan balances. When that happened, you would have typically had to recognize taxable income in the amount of the forgiven debt. However, in the aftermath of the financial crisis, lawmakers created this provision to keep hard-hit homeowners from facing a big tax bill, and the extender kept this break alive for 2018.
4. Credit for energy-efficient home improvements
Prior law allowed homeowners to take a tax credit of up to $500 for various energy-efficient home improvements made to a principal residence. That was slated to expire in 2017, but the extender bill not only brought it back for 2018, but also kept it going for 2019 and 2020, as well.
Get the money you can
These provisions are useful for those preparing their 2019 tax returns. But if you could save money by refiling your 2018 taxes, it's worth doing so, as well. Some of these provisions can save you hundreds or even thousands of dollars on your tax bill.
The lesson here is that it's never too late for tax laws to change. It's rare to have tax breaks restored this late, but for those who can save a little extra cash as a result, the news has never been better.
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March 09, 2020 at 06:34PM
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Surprise! These 4 Tax Breaks Are Back - Motley Fool
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