Retroactive Changes for 2017 Tax Year
The Bipartisan Budget Act was enacted on February 9, 2018, and it includes the retroactive extension of certain tax provisions that had previously expired after December 31, 2016. As a result, these provisions are now available for the 2017 tax year.
While the legislation extends many previously-expired provisions, the most significant of these extended provisions are:
— The above-the-line deduction for higher education tuition/fees
— The mortgage insurance premiums deduction on Schedule A
— The exclusion of income on the discharge of up to $2 million of home acquisition indebtedness secured by a principal residence
— The $500 residential energy property credit
The Bipartisan Budget Act extends each of these provisions only for the 2017 tax year, and they now expire after the 2017 tax year. In the future, Congress may further extend these provisions for later tax years, but, as of now, these provisions are not available for tax years after 2017.
The IRS will need to adjust the forms and instructions for the 2017 version of Form 1040 to reflect these retroactive changes that affect the 2017 tax year.
Practitioners with clients who are affected by these changes should defer finalizing the 2017 tax returns until the IRS makes these adjustments. It may also be necessary to file extensions for such clients, depending on how long it takes the IRS to make the adjustments.