Congress has passed new legislation that will impact your 2019 filing. The Taxpayer Certainty and Disaster Relief Act, the “Disaster Act,” extends several tax breaks through 2020.

Key extensions

1. Medical deduction- December 2017’s Tax Cuts and Jobs Act (TCJA) reduced the threshold for deducting medical expenses from 10% of AGI to 7.5% but only for 2017 and 2018. The new law restores the lower 7.5% of AGI threshold through 2020. See Tax Reform and the Medical Expense Deduction.
2. Mortgage debt forgiveness- You are able to exclude a discharge of qualified mortgage debt from federal income tax, up to a limit of $2 million. This tax exclusion is only available for debt on a principal residence.
3. Mortgage insurance premiums- Under this provision, taxpayers can deduct mortgage insurance premiums, subject to a phase-out beginning at $100,000 of adjusted gross income (AGI). This deduction can be applied to payments on a principal residence and one other home (vacation home, for example).
4. Work opportunity tax credit (WOTC)- Hiring workers from certain disadvantaged groups? Your business may be able to claim a Work Opportunity Tax Credit (WOTC), which equals 40% of the worker’s first-year wages up to $6,000, for a maximum credit of $2,400 per worker. For a disabled veteran, the credit may reach as high as $9,600.
5. Tuition and fees deduction- This deduction can be claimed above the line in lieu of a higher education credit. It is subject to a phase-out based on modified adjusted gross income (MAGI). Depending on MAGI the credit could be either $4,000 or 42,000 until the phase-out is complete.
6. Plug-in vehicles- Do you own a highway-capable, two-wheeled plug-in electric vehicle? The new law provides a 10% credit capped at $2,500 for owners of these vehicles, provided the battery capacity within the vehicles is greater than or equal to 2.5 killowatt-hours. See Incentives Are Still Available for Buying Certain Electric and Hybrid Vehicles.
7. Family and medical leave credit- Employers who provide family and medical leave to employees can claim a credit based on wages paid for a maximum of 12 weeks. It ranges from 12.5% to 25% of the paid wages.
8. Empowerment zones- If you or your business are located within designated “empowerment zones” (EZs), you are eligible for special tax incentives such as a 20% wage credit, liberalized section 179 expensing, tax exempt bond financing and deferral of capital gains tax on the sale of qualified assets sold and replaced.

Questions on what you can expect this filing season? Reach out to our Tax Services Team.