In December 2019, Congress passed and the President signed into law the Taxpayer Certainty and Disaster Tax Relief Act of 2019 , providing tax relief for millions of Americans. The law extends many already expired provisions that provide tax relief and support for families and individuals, special tax relief for certain disaster victims, and the extension of energy efficient tax credits.
Here are some of the tax extenders and special provisions for disaster relief victims that were extended through tax year 2020:
Extended tax relief for individuals and families
- Mortgage debt exclusion: Financial crisis can sometimes be unavoidable. If you experienced a foreclosure, short sale, or loan modification, you may still be able to exclude the amount of debt forgiven on your principal residence on your 2020 taxes up to $2,000,000.
- Mortgage insurance premiums: You may not be thrilled about the mortgage insurance your lender required when you purchased your home, but you may be able to deduct the amount you paid for the mortgage insurance, which is considered interest for mortgage interest deduction purposes. There are income requirements as the deduction phases out for taxpayers with adjusted gross income over $100,000 ($50,000 if married filing separately).
- Tuition and Fees Deduction: You may once again have another education tax benefit option with the extension of the Tuition and Fees Deduction if you, your spouse, or your dependent child have college expenses. The Tuition and Fees Deduction is an above-the-line tax deduction for qualified expenses for higher education like tuition, books, and other supplies, up to $4,000 even if you only took one class. The deduction is capped at $4,000 for individuals with adjusted gross income (AGI) up to $65,000 ($130,000 for joint filers) and $2,000 for individuals with AGI over $65,001 up to $80,000 (and $130,001 to $160,000 for joint filers).
- Medical expense deduction: Medical expenses can really add up for individuals and families. The medical expense deduction threshold was set to go back up to 10% in 2019, but the new provision extends the threshold of 7.5% so you may be able to claim your unreimbursed medical expenses if they are more than 7.5% of your adjusted gross income and you can claim itemized tax deductions. For example, if your adjusted gross income is $50,000, you can claim your medical expenses that are more than $3,750 ($50,000 x 7.5%) if you can claim itemized deductions. At the 10% threshold they would need to be more than $5,000.
Incentives for energy efficiency
- Nonbusiness Energy Property Credit: If you made energy efficient improvements to your home like energy-saving roofs, windows, skylights, and doors, you'll still be able to claim the Nonbusiness Energy Property credit for 10% of amounts paid for qualified energy efficiency improvements up to a lifetime cap of $500 or in 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.
- Credit for new qualified fuel cell motor vehicles: If you purchased a new qualified fuel cell vehicle, you may receive a credit between $4,000 and $40,000 depending on the weight of your vehicle.
Tax relief for disaster victims
The disaster relief portion of the law provides special tax relief for individuals and businesses in Presidentially-declared disaster areas occurring between January 1, 2018 and 30 days following the date of enactment of the law. Here are some of the provisions providing relief:
- Special rules for qualified disaster-related personal casualty losses: If you were a disaster victim, the provision eliminates the current law requirement that personal losses have to exceed 10% of adjusted gross income and eliminates the requirement that you have to itemize your tax deductions in order to claim your casualty loss.
- Eased access to retirement funds: If you were a hurricane victim, you won't be subject to the 10% early plan withdrawal penalty for qualified disaster relief distributions from retirement funds up to $100,000. If you had to cancel your home purchase as a result of an eligible disaster, you can also re-contribute your retirement plan withdrawal for home purchases or construction and avoid the tax on the plan withdrawal.
- Special rules for determining Earned Income Tax Credit and Child Tax Credit: If you were in a designated disaster area, you can use income from 2019, if it's higher, to qualify for the Earned Income Tax Credit and the Child Tax Credit.
- Automatic extension filing deadline: If your principal place of residence or business is located in a disaster area you're automatically granted a 60-day tax filing extension.
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