As it has in years past, Congress again passed in late December a set of last minute changes to the tax law. Many of these changes are retroactive and will affect your 2019 tax return. Here are some of the highlights that have reached back to affect the 2019 tax year:
- The tuition and fees deduction is available. The above the line deduction for up to $4,000 in qualified tuition and fees that expired is once again available in 2019. You will need to evaluate this tax break versus others like the American Opportunity Credit and the Lifetime Learning Credit.
- Mortgage Insurance Premiums as an itemized deduction. If your mortgage bank requires insurance on your loan and the loan qualifies, you may once again deduct this premium as an itemized deduction.
- Medical expense deduction threshold stays at 7.5%. Prior rules had the threshold set at 10%. To deduct qualified medical expenses, your costs will now need to exceed 7.5% of your adjusted gross income.
- Mortgage forgiveness is not income. If a bank forgives mortgage indebtedness, it is typically income to you. Now qualified principal residence indebtedness that is forgiven may be excluded from income with the reactivation of this tax law.
- Disaster area filing extensions. In addition to allowing taxpayers to take penalty-free money out of retirement accounts for 2018 and 2019 in federally declared disaster areas, the new rules create an automatic 60-day filing extension for future declared disaster areas. In the past, the IRS issued these filing extensions on a case-by-case basis.
If you think any of these changes will affect you and your 2019 tax return, please contact our office so that we can provide you with more details.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.