The Bipartisan Budget Act extends for one year — through the 2017 tax year — a number of tax extender provisions that originally expired after 2016.
Extenders for Individuals and Families
The most impactful of these extender provisions are as follows:
Exclusion for Discharge of Mortgage Debt
Typically when debt is forgiven, the debtor is considered to have received income for tax purposes in the amount of the forgiven debt.
Prior to 2017, the tax code made an exception for mortgage debt on a principal residence. If some or all of the debt was forgiven, perhaps as a result of a short sale or foreclosure, the forgiven debt was excluded from income for tax purposes. This exclusion was limited to $2 million for married couples filing joint returns ($1 million for singles or married couples filing separate returns) and expired as of the end of 2016
The Act extends the exclusion for forgiven debt on a principal residence through 2017. The exclusion includes debt discharged in 2017, as well as debt discharged after 2017 if it resulted from a written agreement that was entered into in 2017.
Deduction for Mortgage Insurance Premiums
Prior to 2017, mortgage insurance premiums were deductible as qualified residence interest, an itemized deduction. The Act extends this deduction through 2017.
Deduction for Qualified Tuition and Related Expenses
For an additional year, 2017, higher education expenses are deductible when calculating adjusted gross income (AGI) which means they’re deductible even by those who do not itemize. It’s referred to as an above the line deduction.
The deduction includes the expenses of spouses and dependents for tuition and related costs. It is subject to limitations based on AGI.
Credit for Residential Energy Property
This $500 lifetime tax credit, including various limitations, has been extended through 2017. The credit is generally equal to 10 percent of the amount of qualified energy efficiency improvements plus the amount of residential energy property expenditures for the year.
Credit for Energy-Efficient Property
This 30 percent credit for the purchase of qualified fuel cell property, small wind energy property and geothermal heat pump property was extended to include such property placed in service through 2021 — matching the expiration date for qualified residential solar electric and solar water heating property.
Other Extended Provisions
The Act extends a number of other, less commonly used tax provisions. They include such deductions and credits as the credit for fuel cell vehicles and the credit for two-wheeled electric vehicles, among other tax provisions. It also provides tax relief for those impacted by the California wildfires.
The Act also extends various business tax provisions, including the domestic production activities deduction for Puerto Rico, the Indian Employment Credit, and Empowerment Zone incentives.
Concerned about the impact of changing rules