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Federal tax changes beyond the Tax Cuts and Jobs Act

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Most of the changes as a result of the Tax Cuts and Jobs Act recently signed into law by President Trump take effect this year – or when you file your 2018 taxes a year from now.

However, there also are a few changes, mostly as a result of expiring provisions, that will affect 2017 tax returns – which are important in today’s tax-filing season.

For example, the Internal Revenue Service annually adjusts the value of certain deductions and exemptions for inflation, and this year is no exception. For a complete of list of changes as a result of inflation, visit irs.gov.

TUITION AND FEES

Some tax provisions expired at the end of 2016 and are not available on 2017 tax returns.

Expiring tax provisions include the elimination of Form 8917 (tuition and fees deduction). Form 8917 is used to figure and take the above-the-line deduction for tuition and fees expenses paid in the current tax year.

Tuition and fees expenses are still eligible for the educational tax credits (American opportunity credit and the lifetime learning credit), which can be claimed on Form 8863.

MORTGAGE INTEREST, ENERGY CREDITS

Also expiring in 2017 is the qualified mortgage insurance deduction on Schedule A. In prior years, this was deductible as mortgage interest.

Form 5695 (residential energy credits) no longer includes qualified insulation, energy efficient improvements and qualified solar energy panels.

The tax-free discharge of indebtedness (cancellation of debt) for a principal residence no longer qualifies as an exception to the rule.

The medical expense deduction will be 7.5 percent of adjusted gross income for everyone, under prior law for those under 65 years, it was limited to 10 percent of adjusted gross income. (Beginning with 2019, the threshold increases to 10 percent of adjusted gross income.)

DEPRECIATION

The Section 179 depreciation option has been made permanent and indexed to inflation. For 2017, the limit is $500,000 if purchases exceed $2 million – there is a dollar-for-dollar phase out.

In 2017, you can be a “qualified widow” or “widower.” While you still need a child that meets certain qualifications in order to qualify, the child no longer needs to be claimed as a dependent.

There is a new federal Form 8904, credit for oil and gas production from marginal wells.

Form 8863 (educational credits) now requires the tax identification number of the educational institution, even if the institution didn’t issue a Form 1098-T.

RELIEF

With Form 9100 (notice of late election), now there is informal relief if the election is made within six months of the original due date of the return, or 12 months, depending on the election the taxpayer missed.

Formal, nonautomatic relief is available by filing a private letter ruling.

Finally, there are new preparer penalties for 2017.

CHANGES IN DUE DATES

Some due dates for 2017 tax returns have been changed.

Form 1065 (U.S. return of partnership income) is now due March 15, 2018.

Form 1120 (U.S. corporation income tax return) is now due April 17, 2018, however Form 1120S (U.S. income tax return for an S corporation) is still due on March 15, 2018.

The Protecting Americans from Tax Hikes Act requires the due dates for certain information reporting forms by Jan. 31, 2018. W-2 Forms, W-3 Forms, 1099-MISC and NEC (nonemployee compensation) forms were now due Jan. 31, not Feb. 28 as in prior years.

HELP FROM A PRO

A tax professional can be a great help for anyone who is self-employed or just needs an extra set of eyes on his or her taxes.

Navigating complicated topics such as depreciation, health care or retirement contributions can be very complex, but with proper planning and advice, they will be more manageable.

John D. Rossi III is a business leader, lecturer, accountant and financial planner with more than 30 years of business and academic experience. An associate professor of accounting at Moravian College in Bethlehem, he is president of JR3 Virtuoso Solutions Inc., specializing in financial reporting, taxation, professional training and consulting services. He can be reached at jdrossi3@verizon.net.

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