Is it worth your time to take advantage of 2018 provisions and amend or not?
Years ago it was common for congress at the end of each year right before the new year started to pass a tax extenders bill.
They would pass that bill looking forward. Maybe there would be tax provisions in the code that would be expiring on December 31st and they would pass an extender bill which would extend those provisions into the next year or even the year after that. It would extend the provisions into the future to give tax payers some certainty. Tax payers enter a new year knowing what the law was and knowing what they could count on.
Congress seems to be more and more dysfunctional at least in the last 20 years or so and that is born out in the way congress has become a custom to passing tax extender bills.
In recent years extender bills haven’t been effectively passed before the new year to give people some a surety. Congress drug their feet and basically pushed the time to pass those extender bills back 10+ months. In the recent past tax extender bills have been passed in December of the year to which the law applied. For example – A tax law expired on dec 31, 2016, we needed an extender bill to make that law applicable to 2017. Congress starts to drag their feet and they did not pass the extender bills until late in 2017.
The past year it was even worse. In late December 2019, congress passed an extenders bill, like they often do, but this extenders bill extends provisions in the tax code for the year 2018. So these are provisions that expire the end of 2017. It extends those 2017 provisions into 2018, 2019, & 2020 are some extend a little further than that. It’s been two years since our last extender bills.
The most recent extender bill effected tax year 2018. Almost everyone in the country has already filed their 2018 tax returns. No surprise, but these tax extenders that were passed just last month, apply to 2018.
What does that mean? If you want to take advantage of some of these extenders for 2018 you need to amend your tax return. Most people will not amend their tax return even if the extenders help them, for many of you, amending your 2018 return will be worth the hassle and expense.
Let me give you a couple highlights of things that were extended.
1- They extended the exclusion of income from the cancellation of debt on a primary resident. In 2018 if you had a cancelation of debt on your primary resident or what was your primary resident back then. You probably included that income In your taxable income and paid taxes on it. If you did that…well guess what? you can amend and get a bunch of money back. If you did include that money in there you most likely paid a lot of taxes.
2- Mortgage insurance premiums – The deductions for mortgage insurance premiums 2018, those premiums were reported on forms 1098 from mortgage companies in hopes that congress would extend their provisions. They never did, they never did , they never did, and then they did. If that applies to you and you paid mortgage insurance premiums but weren’t able to take advantage in 2018 you could amend. It might not be a lot of you this applies to, but there are a few that might do enough good to go back and amend.
3- The medical expense deduction is a little bit better with the extenders.
4- Non business energy property – things like energy efficient windows, doors, insulation, air conditioning units, heat pumps, etc. Those kind of energy efficient improvements that would have been made on the property there is a credit for those, up to $500. It is a lifetime credit of $500 so if you have ever taken that before and got your $500 credit it wouldn’t do you any good, but if you have never taken advantage of that credit and you purchased any of those things or some other things I did not mention. If you purchased those in 2018 you can go back and claim this credit. It could be worth $500 to you.
There are a number of other obscure things that were extended but these were some of the big ones.
Is it worth your time to take advantage of 2018 provisions and amend or not? Either way you can take advantage of any of these things on your 2019 tax return and 2020 tax return when you file that in a year.