On December 20th, the Further Consolidated Appropriations Act was amended, extending tax provisions that were set to expire by the end of 2019. These provisions will now be effective through the upcoming fiscal year, ending September 30, 2020.
The provisions in this bill pertain to: Tax Relief and Support for Families and Individuals; Incentives for Energy Production, Efficiency, and Green Economy Jobs; and Incentives for Employment, Economic Growth, and Community Development. Some of the most relevant provisions include:
- Exclusion from gross income of discharge of qualified principal residence indebtedness: provides a maximum exclusion from gross income of $2,000,000 for a discharge of qualified principal residence indebtedness. Generally, indebtedness must be the result of acquisition, construction, or substantial improvement of primary residence.
- Treatment of mortgage insurance premiums as qualified residence interest: provides for the treatment of qualified mortgage insurance premiums as interest for purposes of the mortgage interest deduction. This deduction phases out for taxpayers with adjusted gross income (AGI) over $100,000 ($50,000 if married filing separately).
- Reduction in medical expense deduction floor: . Before 2017, individuals could claim an itemized deduction for unreimbursed medical expenses to the extent that such expenses exceeded 10 percent of AGI. The provision extends the lower threshold of 7.5 percent, originally enacted for 2017 and 2018.
- Deduction of qualified tuition and related expenses: provides an above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose AGI does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).
- Classification of certain race horses as 3-year property: assigns a 3-year recovery period for race horses two years old or younger placed in service before 2021.
- Nonbusiness energy property: provides a credit for purchases of nonbusiness energy property. The provision allows a credit of 10 percent of the amounts paid or incurred by the taxpayer for qualified energy improvements to the building envelope (windows, doors, skylights, and roofs) of principal residences. The provision allows credits of fixed dollar amounts ranging from $50 to $300 for energy-efficient property including furnaces, boilers, biomass stoves, heat pumps, water heaters, central air conditioners, and circulating fans, and is subject to a lifetime cap of $500.
- Energy efficient commercial buildings deduction: provides a deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems of commercial buildings. This includes a $1.80 deduction per square foot for construction on qualified property. A partial $0.60 deduction per square foot is allowed if certain subsystems meet energy standards but the entire building does not, including the interior lighting systems, the heating, cooling, ventilation, and hot water systems, and the building envelope.
A complete list of the updated and extended provisions can be found at Appropriations.Senate.gov.