In case you missed it…
Ernie Neve, CPA
April 9, 2020
Let me be blunt – there’s TOO much “bad” news I the world and I flatly refuse to feed into it. Yes, COVID-19 is unprecedented in any modern economy. Yes, lives are being lost or changed forever. Yes, millions of employees are being laid off or furloughed.
But in the end, this will pass. The Federal government has moved far faster than many of us thought (and yes, I recognize it’s made missteps, but remember, we’re staying positive here!) and is poised to put trillions of dollars into the economy starting this week.
That money is going to get to the hands of the men and women who work for a living in this country and who will rebuild it again in the coming months. We’re going to see, in the very near future, more than simply stimulus checks in the mail, we’re going to see businesses actively hiring, growing rapidly, and consumer demand for nearly anything (except maybe toilet paper) go through the roof.
I know that a lot of you have already filed, but since Tax Day has been pushed from an April deadline to July 15th, I wanted to share some good news that you might have missed.
Four pieces of good news, in fact…
Late last year, several “expired” tax breaks were brought back by Congress, and in each of them, there’s some juicy savings, if you qualify…
Let’s take a look!
· College Tuition Deductions. If your income is too high to have been able to claim the popular American Opportunity and Lifetime Learning Credit, which we’ve discussed several times over the years, there’s good news. For your 2019 return, you can claim up to a $4,000 deduction for you, your spouse, or your dependents. The total deduction is tiered based on income and disappears after your AGI reaches $160,000, but this is still a great tool that a lot of folks have been missing in the last year or two.
· PMI Premiums. I remember the first house I bought and asking the loan officer at the bank what PMI (Private Mortgage Insurance) was. As I listened to the description, all I could do was shake my head. After he was done, I couldn’t believe such a thing existed and I had to ask, “So, I need to pay for insurance for the lender to make sure I pay the mortgage? That’s seems kind of backwards…” Like it or not, many homeowners are stuck with PMI until they get to a certain amount of equity, usually 20%, and this year, as in many years past, homeowners will be allowed to deduct the cost of the PMI on your return – again, based on your adjusted gross income.
· Debt forgiveness on foreclosures and short sales. This tax break originated after the real estate meltdown in 2007-2008. Prior to that, if debts were forgiven, the amount of the debt was considered income for tax purposes. After the Great Recession, Congress allowed forgiveness related to the debts on primary residences up to $2 million – and the debt could be based on the loan for the home itself or on certain loans pertaining to improvements on the residence. As of this writing, this extension will flow into the 2020 tax year.
· Energy efficient home improvements. There was a minor boom several years ago wit the various tax incentives offered by states and the federal government and, when those credits were phased out, a correlating drop. Nonetheless, those credits – to be used on improvements like qualifying windows, doors, skylights, roofs insulation, heating and air conditioning systems and water heaters, plus material and labor costs for other qualified upgrades. Now, there are limitations, of course, but if you found yourself handling these types of projects in 2019, then there’s no reason you shouldn’t be able to use these credits if you qualify.
As always, I hope this helps you guys and more importantly, I want to challenge you to rise above the bad news that’s clogging so much of social media and even traditional new outlets. There is a lot of great things happening if you’ll only take the time to look!