These tax breaks are vanishing: Grab them while you can
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Before you hand in your tax return to the IRS, be sure to go over your receipts: You could miss out on key tax deductions and credits that are about to go extinct.
That’s because the Tax Cuts and Jobs Act went into effect at the beginning of this year and overhauled the tax code, doubling the standard deduction and doing away with personal exemptions.
This means that the 2017 tax year is the last time you’ll be filing under the old code and it’s the last call for certain tax breaks.
Though a number of deductions are scheduled to return at the end of 2025, it will be up to Congress to determine whether these provisions are extended.
“There are overlooked deductions that are going away, including unreimbursed employee expenses and job-search expenses,” said Lisa Greene-Lewis, a CPA with TurboTax.
“With the standard deduction doubling, some people will not be itemizing [in 2018],” said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.
Further, Congress recently extended for 2017 a package of tax breaks that would have otherwise expired in 2016.
Here are the key tax deductions and credits you should grab while you still can.
This year is the last time you can claim a deduction for personal losses that you sustained in a given year due to an event such as a natural disaster, fire or accident.
The total amount of your losses on personal property must exceed 10 percent of adjusted gross income.
Generally, you must claim these losses as an itemized deduction, but there’s an exception for survivors of Hurricanes Maria, Irma and Harvey, which struck last year.
“For 2017, people who were victims of the hurricanes or California wildfires can claim a casualty loss even if they don’t itemize,” said Greene-Lewis.
Starting in 2018, you can claim a loss only if it occurs in a disaster that’s declared by the president. This provision expires after 2025.
Home equity loan interest
The 2017 tax year will be the last time that you can deduct interest paid on home equity loans and home equity lines of credit if you borrowed up to $100,000, no matter how you spent the money.
Starting in 2018, new limits will apply to your ability to deduct interest.
“If the home equity loan was not used to build, buy or improve your home, you won’t be able to deduct that in 2018, regardless of when the loan was taken out,” said Luscombe.
Mortgage insurance premiums
This break, which allows homeowners to deduct the amount they’ve paid for mortgage insurance, was set to expire at the end of 2016. Congress renewed it retroactively for 2017 tax returns.
Borrowers who itemize their deductions on Schedule A may apply.
Did you know that you can deduct property taxes on all of the homes you own — and not just your principal residence?
Be aware: This break is due for some major changes. Starting in 2018, the deductibility of property taxes will be subject to the new $10,000 cap on state and local taxes or SALT.
Owners of multiple homes will especially feel the limitation on this tax break.
“That $10,000 cap is per taxpayer,” said Greene-Lewis — not per home. “The 2017 tax year is the last year you can claim full value of property taxes.”
Exclusion for forgiven debt
Generally, if a lender cancels all or part of your debt, that amount is considered to be income.
Here’s an exception: Filers who had a loan modification, foreclosure or short sale last year can exclude the amount of debt forgiven on their principal residence from gross income in 2017. This break, which would have expired, was among the “tax extenders” Congress recently approved.
Deduction for qualified tuition costs
Here’s another break that’s back, thanks to the tax extenders. If you or your child are in college, you may be able to deduct tuition, books and supplies for your studies by up to $4,000.
Room and board, along with other personal expenses, do not qualify.
Alternatively, you may take one of the education credits for your costs: the American opportunity tax credit, which is worth up to $2,500 per eligible student; or the lifetime learning credit, which is worth up to $2,000 per tax return.
Be aware that you can’t claim an education credit and the tuition deduction for the same expenses.
Energy efficiency incentives
Congress extended access to credits for energy-saving home improvements.
The credit for “non-business energy property” is for homeowners who added certain efficient windows, doors and insulation. It’s subject to a lifetime limit of $500.
The “residential energy property credit” is also around for the 2017 tax year. It applies to homeowners’ purchase of qualified solar water heaters, geothermal heat pumps and other alternative energy equipment.
Filers should know that the IRS is still updating its systems to process returns claiming these energy-efficiency credits and certain other tax extenders.
At the moment, the agency is ready to handle returns that have claimed the extended breaks for mortgage insurance, discharged residence debt and qualified tuition.
Tax prep, investment fees and more
This is the last year you can take miscellaneous itemized deductions, including those for tax preparation and investment fees and unreimbursed employee expenses.
You can deduct these costs to the extent they exceed more than 2 percent of your adjusted gross income.
This break is also on its way out.