Congress Makes Many Tax Extenders Retroactive

The newly passed bipartisan budget deal makes many tax extenders retroactive to this year. 

Since the end of 2016, the fate of several expired tax extenders has been up in the air. The 2017 Tax Cuts and Jobs Act did not include a review of these expired provisions, but the bipartisan budget deal recently signed into law makes over 30 of them retroactive to 2017. Here’s what you need to know.

What are tax extenders anyway?

Tax extenders are the temporary, constantly expiring tax breaks for individuals and business that Congress has historically scrambled to extend, on a one- to two-year short-term basis, each December, the exception being in 2015 when Congress made permanent several of the most important extenders -- Section 179 expansion and the R&D credit most notably. With the major provisions permanently extended, the pressure was off to renew to the lesser ones, and 36 minor tax provisions expired at the close of 2016.

Fast forward now to the Bipartisan Budget Deal passed earlier this month. With those 36 extenders still expired (again, tax reform didn’t tackle them), Congress revisited the issue.

What was reinstated?

The budget deal includes many tax breaks for industries such as motorsports, horse racing, renewable energy, and movie, TV and theater production, as well as individual deductions. Most can only be claimed for 2017, but some are set to phase out in 2022.

The following is a list we feel most pertinent to our clients (for a full list, check out the Tax Foundation’s website).

• Exclusion of a discharge of qualified principal residence indebtedness - up to $2 million ($1 million for married individuals filing separately) from gross income.
• Treatment of mortgage insurance premiums as qualified residence interest for purposes of the mortgage interest deduction, subject to a phase-out based on adjusted gross income.
• Above-the-line deduction for qualified tuition and related expenses, subject to a phase-out based on adjusted gross income.
• The nonbusiness energy property credit of up to $500 for qualifying energy-efficient improvements.
• 30% nonrefundable credit for the purchase of a) qualified fuel cell property; b) qualified small wind energy property; and c) qualified geothermal heat pump property.
• Credits for qualified fuel cell motor vehicles as well as two-wheeled electric plug-in vehicles.
• Extension of the biofuel producer credit as well as biodiesel and renewable diesel credits.
• The new energy efficient home credit for the construction of qualified new energy efficient homes.
• The 179D deduction for the cost of energy efficient commercial building property.
• The alternative fuels credit, which includes the propane credit.
• Various energy credits related to solar, wind and thermal properties.

Again, not an exhaustive list, but some of the most popular and widely-applicable provisions.

Lots of changes here. The good news is that tax season has already begun, and we shouldn’t get any more surprises. But, as always, we’re following things closely in Washington. Don’t be afraid to reach out with questions.