Tax extender bill passed - refund opportunities may exist

[Lance Lvovsky]

Congress, US Treasury, and the IRS have been involved in a flurry of activity at year end. Congress passed the Taxpayer Certainty and Disaster Tax Relief Act which is effectively a tax extender bill, and then also passed the SECURE act. Many provisions are retroactive to 2018. Many of these laws expired at 12/31/17. As such, there may be refund opportunities. Consult with your tax advisor.

Below is just a summary of some of the provisions. Given the complexity of tax laws, I am only providing a brief statement on each provision. There may be exceptions to each law below, and given the intricacies, you should be speaking with your CPA before taking any action.

Real Estate tax provisions

1. Accelerated depreciation for business property on Indian Reservations. Extended through 2020.

2. Section 123 - Nonbusiness energy property. A tax credit for 10% of amount paid for qualified energy improvements of a principal residence. Cap of $500. Extended through 2020.

3. Section 129 - Energy efficient homes credit. A tax credit of $1,000 or $2,000 allowed to an eligible contractor for the construction of a new energy efficient home. Extended through 2020.

4. Section 131 - Energy efficient commercial buildings deduction. A deduction (for energy efficient improvements to lighting, heating, cooling, ventilation, hot water systems of commercial buildings is extended to apply to property place into service before January 1, 2021. This previously expired December 31, 2017.

5. Section 142 - Employer credit for paid family and medial leave. A tax credit based on wages. Extended through 2020.

6. Section 203 - Employee retention credit for employers affected by disaster area. A tax credit of 40% of wages (up to $6,000 credit per employee) is allowed for 2018 and 2019.

Individual tax provisions

1. Section 102 - treatment of mortgage insurance premiums as qualified residence interest is extended through 2020.

2. Section 103 - Medical deduction threshold of 7.5% of AGI will apply fo 2019 and 2020. Previously scheduled to increase to 10% of AGI.

3. Kiddie tax - repeal of TCJA rules so that the pre-TCJA rules will apply for 2020 and later. However, one can elect to apply pre-TCJA rules for 2018 and 2020. 

4. Section 529 plan changes - the SECURE act expands the types of payments which can get favorable treatment under section 529 distribution rules. Such as: distributions for payments of fees, books, supplies and equipment for an apprenticeship program (certified with Secretary of Labor) are covered. In addition, distributions to pay principal or interest on a qualified education loan. There is a $10,000 limit for each beneficiary and sibling on all 529 plans.

5. Maximum age for traditional IRA contributions is repealed. Recognizing that people are living longer, after 12/31/19, the rule will allow those over 70.5 years to contribute to a traditional IRA.

6. Required minimum distribution age is raised to 72. Applies after 12/31/19.