The President recently signed a spending bill. Contained in this bill were some very significant changes to the tax code that affect both personal and business returns and, in some situations, may justify an amended 2018 return.
Among these changes include:
- renewing several credits and deductions that had expired in prior years and some that were scheduled to expire in 2019
- The TCJA approach to the kiddie tax has been repealed
- There are new disaster relief provisions
- ACA changes
- Section 59 plans changes
- Major changes to retirement plans
The Further Consolidated Appropriations Act, 2020 (the Act) extended the following expired and expiring deductions and credits:
- Exclusion from Gross Income of Discharge of Qualified Principal Residence Indebtedness.
- Treatment of Mortgage Insurance Premiums as Qualified Residence Interest.
- Deduction of Qualified Tuition and Related Expenses.
- Reduction in Medical Expense Deduction Floor.
- Credit for Health Insurance Costs of Eligible Individuals.
- Energy Efficient Homes Credit.
- Nonbusiness Energy Property Credit.
- Energy Efficient Commercial Buildings Deduction.
- Qualified Fuel Cell Motor Vehicles Credit.
- Two-wheeled Plug-In Electric Vehicle Credit.
- Alternative Fuel Refueling Property Credit.
- Credit for Electricity Produced from Certain Renewable Resources.
- Extension and Clarification of Excise Tax Credits Relating to Alternative Fuels.
- Biodiesel and Renewable Diesel Incentives.
- Second Generation Biofuel Producer Credit.
- Special Allowances for Second Generation Biofuel Plant Property.
- Special Rule for Sales or Dispositions to Implement FERC or State Electric Restructuring Policy for Qualified Electric Utilities.
- Alternative Fuel Refueling Property Credit.
- Production Credit for Indian Coal Facilities.
- Increased Excise Tax Rates on Coal.
- Classification of Certain Race Horses as 3-Year Property
- Recovery Period for Motorsports Entertainment Complexes.
- Expensing Rules for Certain Film, Television, and Live Theatrical Productions.
- New Markets Tax Credit.
- Employer Credit for Paid Family and Medical Leave.
- Work Opportunity Credit.
- Empowerment Zone Tax Incentives.
- Provisions Relating to Beer, Wine, and Distilled Spirits.
- Look-Thru Rule for Related Controlled Foreign Corporations.
- Mine Rescue Team Training Credit.
- Indian Employment Credit.
- Railroad Track Maintenance Credit.
- Accelerated Depreciation for Business Property on Indian Reservations.
- American Samoa Economic Develop Credit.
- Oil Spill Liability Trust Fund Financing Rate.
The list above is very long. The credits are named appropriately. If your 2018 return may have been affected by anything in this list, contact your tax professional and ask the question. It isn’t difficult for a tax professional to review a return for improvements. It may be worthwhile to amend that return.
The Act also fixed a problem with the “Kiddie Tax”. For those who have children who have unearned income such as bond interest, the Tax Cuts and Jobs Act of 2017 (TCJA) had se the rate to trust and estate tax rates, rather than the parent’s tax rate. This created the potential for higher tax rates. The Act repealed that provision.
The Act addresses disaster tax relief. These provisions including changes for using retirement funds in a disaster area situation. The Act also provides a credit for employee retention. There are now special rules for qualified disaster-related personal casualty losses. There are also automatic filing deadlines in disaster area.
The Affordable Car Act saw some changes in the Act. The Cadillac Tax was repealed, as was the Medical Device Tax and the Annual Fee on Health Insurance Providers.
Section 529 Plans which allow taxpayers to save for future tuition, saw changes to the distribution schedule and the taxability of distributions and how some of the distributions are used. The details are complex and will vary by state, but these largely overlooked tax planning strategy.
Retirement plans were altered by the Act. These changes included using withdrawals for childbirth and adoption. The Act repealed the prohibition of the maximum age for traditional IRA contributions. The age for required beginning date for mandatory distributions. The rules governing those distributions have also seen changes.
The Act makes other changes affecting first responders, portability of contracts and lifetime income options, and custodial accounts. There are many other changes that we won’t get into here.
The bottom line is that a lot of changes slipped under the radar. Many of these changes are so significant that it may justify an amended return for 2018. If you have any questions, call your tax professional. At Books, Taxes & More, we welcome the opportunity to review previous returns and the law for current and future years to minimize the tax liability at both the state and federal level.