Five Tax Provisions Retroactively Extended for 2017

The Bipartisan Budget Act of 2018 (BBA) retroactively extended a number of tax provisions through 2017 for individual taxpayers. Let’s take a look at five of them.

1. Mortgage Insurance Premiums
Homeowners with less than 20 percent equity in their homes are required to pay mortgage insurance premiums (PMI). For taxpayers whose income is below certain threshold amounts, these premiums were deductible in tax years 2013, 2014, 2015, 2016 and now, once again in 2017. Mortgage insurance premiums are reported on Schedule A (1040), Itemized Deductions, under “Interest You Paid.”

2. Exclusion of Discharge of Principal Residence Indebtedness
Typically, forgiven debt is considered taxable income in the eyes of the IRS; however, this tax provision was retroactively extended through 2017. Homeowners whose homes have been foreclosed on or subjected to short sale are able to exclude from gross income up to $2 million of canceled mortgage debt.

3. Energy Saving Home Improvements
If you made your home more energy efficient in 2017, you have another chance to take advantage of this tax credit on your tax return. This credit reduces the amount of tax owed as opposed to a deduction that reduces your taxable income. The credit is worth up to 10 percent of the cost (excluding installation) of qualified improvements to a taxpayer’s main home to make it more energy efficient such as insulation materials, energy-efficient exterior windows and doors, and certain types of roofs, e.g., metal roof or asphalt roofs specifically designed to reduce the heat gain of your home.

Note: This tax credit is cumulative and has been around for more than 10 years. As such, if you’ve taken the credit in any tax year since 2006, you will not be able to take the full $500 tax credit this year. For example, if you took a credit of $150 in 2016, the maximum credit you could take this year (2017) is $350.Furthermore, taxpayers should also note that they can only use $200 of this limit for windows.