Washington appears to have reached a deal on tax extenders. Extenders are a term used to refer to expired or expiring tax provisions, and tend to be short-term. That’s the case here, with most breaks renewed only through 2020.
- The mortgage insurance premium (sometimes called PMI) deduction may show up on your Schedule A again. As part of the efforts to revive the housing market, Congress passed a law allowing a tax deduction for the cost of PMI for homes and vacation homes. Under the law, premiums for mortgage insurance (PMI) were lumped together with deductible home mortgage interest on Schedule A. The provision expired but was renewed retroactively for 2017. Now, it would be extended to 2020.
- The new-old medical expenses deduction floor may be back. Under the TCJA, the medical expense deduction survived, but there was a catch. While the 7.5% floor returned for the tax years 2017 and 2018, it bounced back to 10%. Under the extenders bill, the (old) 7.5% floor would be extended through 2020. We call it a floor because you can only deduct expenses over 7.5% of your adjusted gross income (AGI).
- The qualified tuition and related expenses deduction may also be making a comeback. Pre-TCJA, the deduction allowed taxpayers to claim an above the line deduction for qualifying expenses – without having to itemize. The deduction was cut but could be extended through 2020.
Please note: I request all my clients who may be affected by the above extenders to contact me after Apr 15, 2020 to see if filing an amendment helps them.