Momentum - Business to Business Online Magazine MOMENTUM February 2020 | Page 16

INDUSTRY SPOTLIGHT - FINANCIAL LITERACY & TAXES T. MARK RUSH, CPA Partner Ham, Langston & Brezina, LLP [email protected] LAST MINUTE Appropriations Act Includes Extenders T he Further Consolidated Appropriations Act of 2020 provides for many year-end tax changes - some retroactive. Below is a summary of the most significant extender provisions. 31, 2020. If you paid qualifying tuition in 2018, an amended return may be required. KIDDIE TAX- For tax years beginning after Dec. 31, 2019, the unearned income of certain children is again taxed at the parents’ tax rate. In 2018 and 2019, the TCJA taxed the unearned income of children using the much higher trust tax rates. The law is changed to allow a taxpayer to elect for the change to also apply to taxable years beginning in 2018, 2019, or both, an amended return may be required. L A S MIN T UT MEDICAL EXPENSE DEDUCTION 7.5% AGI LIMIT EXTENDED - For taxable years ending before Jan. 1, 2021, the threshold for deducting medical expenses is 7.5% (was 10%) for all taxpayers. In 2021, the AGI threshold increases to 10%. MORTGAGE INSURANCE PREMIUM (MIP) DEDUCTION RETROACTIVELY EXTENDED - Premiums paid or accrued for qualified MIP by a taxpayer during the taxable year in connection with acquisition indebtedness related to a qualified residence of the taxpayer are treated as qualified residence interest. The MIP treated as interest is reduced by 10% of such amount for each $1,000 ($500 in the case of a married individual filing a separate return) that the taxpayer’s AGI exceeds $100,000 and is entirely phased out at $110,000. The MIP deduction had expired Dec. 31, 2017. The expiration is now Dec. 31, 2020. If you paid MIP in 2018, an amended return may be required. TUITION DEDUCTION RETROACTIVELY EXTENDED- Qualified taxpayers are allowed an above-the-line deduction for qualified higher education expenses paid by the taxpayer during a taxable year. Taxpayers with AGI not exceeding $65,000 are entitled to a maximum higher education tax deduction of $4,000 and taxpayers with AGls that don’t exceed $80,000 are entitled to a maximum deduction of $2,000. Taxpayers with AGI above these thresholds get no tuition deduction. This deduction is not allowed if the American Opportunity Tax Credit produces a lower tax. The tuition deduction had expired Dec. 31, 2017. The expiration is now Dec. 14 MOMENTUM NONBUSINESS ENERGY PROPERTY CREDIT RETROACTIVELY EXTENDED THROUGH DEC. 31, 2020- An individual is allowed as a credit against tax an amount equal to the sum of 10% of the amount paid or incurred for qualified energy efficiency improvements installed during such taxable year, and the amount of the residential energy property expenditures paid or incurred by the taxpayer during a taxable year. The credit allowed cannot exceed $500 over the total credits allowed for all prior taxable years ending after Dec. 31, 2005. The nonbusiness energy property credit had expired Dec. 31, 2017. The expiration is now Dec. 31, 2020. If you installed energy property, an amended return may be required. E EMPLOYER CREDIT FOR PAID FAMILY AND MEDICAL LEAVE EXTENDED ONE YEAR- An employer is allowed to claim a 12.5% general business credit of the amount of wages paid while an employee is on family and medical leave if the rate of payment under the program is 50% of the wages normally paid to an employee. The credit is available for wages paid in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2021. The credit is increased by 0.25 percentage points, up to 25%, for each percentage point by which the rate of payment exceeds 50%. The maximum amount of family and medical leave that may be considered with respect to any employee for any taxable year is 12 weeks.