Congress agreed to the government funding bill and expired or expiring tax breaks are being extended through 2020! Among the breaks were mortgage insurance premium write off, the medical expense AGI threshold which was supposed to go back to 10% for deducting medical expenses on Schedule A but was kept at 7.5%. There are many more tax breaks including the Work Opportunity tax credit. This break is for employers who hire workers who are economically challenged. These breaks and many others are retroactive back to 2018. If you want to take advantage of these tax breaks for 2018 you will have to amend your return. The funding bill also included the Secure Act which is retirement savings legislation. Some of the highlights of this bill include allowing 401(k) plans to let part time employees participate, changing the minimum distribution age from 70 ½ to 72 for IRA’s and workplace plans. Owners of traditional IRA’s can now contribute past the age of 70 ½.
The 2019 Form 1040 is a little different than the 2018 Form. There is now a line added for capital gains and losses on the first page. The Schedules are now down to 3 schedules from the 6 on the 2018 Form. Taxpayers that deduct alimony report this on Schedule 1 and must list the date of the divorce agreement on the schedule. There is also a question added on Schedule 1 asking whether you transacted in virtual currency.
Senior citizens can now file their return on Form 1040-SR. It contains the same information that the regular 1040 has but in larger print. Seniors are not required to use this form they can still use the regular Form if they choose.
If you are buying an electric car and taking a tax credit the IRS will be monitoring the credit closely. Treasury Inspectors found that taxpayers had erroneously claimed an estimated 83 million dollars in credits for electric cars over the past 4 years. The IRS will be comparing the VIN reported by taxpayers against third party VIN information to verify the credit.
The safe harbor for rental real estate has been finalized by Treasury. You can qualify for the QBI deduction if you spend at least 250 hours per year on preforming services on the rental property such as maintenance, repairs, rent collection, payment of expenses, services to tenants and efforts to rent the property. Time you spend arranging financing, reviewing statements or reports of operations and traveling to the real estate are not considered part of the required 250 hours.