The massive tax law passed at the end of the last year—the Protecting Americans from Tax Hikes (PATH) Act – retroactively preserved a number of expired tax breaks for individuals and businesses, making many of them permanent. But a handful of other tax provisions were extended only on a temporary basis.
Now some of those tax provisions are up for renewal, but the lame-duck Congress doesn’t appear to be paying much attention. And when the new session of legislators convenes in January, it’s likely they’ll be more consumed with visions of tax reforms dancing in their heads. The expiring tax breaks are expected to just die on the vine.
What tax provisions are we talking about? Here are seven that might not be around after New Year’s Eve.
Tuition-and-fees deduction: In lieu of claiming one of the higher education tax credits, you can deduct tuition and fees paid to a college. The deduction is limited to either $2,000 or $4,000, depending on modified adjusted gross income (MAGI), but it’s completely phased out for higher-income taxpayers. Note that qualified expenses paid in 2016 for the next semester in 2017 are generally deductible on 2016 returns.
Residential energy credit: This is the home energy credit that most taxpayers are familiar with. It is generally equal to 10% of the cost of qualified energy-saving improvements installed in a principal residence (but not second homes). However, there’s a lifetime limit of $500 credit and separate dollar limits on certain types of expenses.
Residential energy-property credit: This lesser-known energy credit is equal to 30% of the cost of renewable energy source installments in your home. You can claim this credit for a new home or a primary residence, but you must be the homeowner. In other tenants can’t claim the credit.
Alternative motor vehicle tax credit: A credit is available if you buy a new full-cell motor vehicle (i.e., a vehicle powered by cells converting energy into electricity). Credit amounts depend on the make and model of the vehicle. What’s more, you must be the original owner – lessees and used car buyers aren’t eligible.
Plug-in vehicle credit: Yet another credit can be claimed by original purchasers of qualified plug-in electric drive motor vehicles. These vehicles run by an electric motor and draw electricity from a rechargeable battery. Credit amounts vary according to make and model.
Mortgage interest premiums: A taxpayer may deduct mortgage insurance premiums paid on a qualified residence, subject to a phaseout beginning at $100,000 of AGI. The insurance is effectively treated as deductible mortgage interest on your 2016 tax return.
Mortgage debt forgiveness. Finally, the PATH Act extended the tax exclusion for mortgage debt forgiveness through 2016. Under this provision, there is no tax due on the cancellation of up to $2 million of debt on a principal residence.
These tax breaks have expired and been reinstated before, but don’t hold your breath waiting for it to happen again. Nevertheless, it is conceivable that one or more of the provisions – including the tuition deduction – could be granted another another life if Congress puts its mind to it.
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