Over the course of this year, I’ve written (check the “Search” box on the right, with the keyword ‘Tax’ or click on the black band above and choose the “Taxes” section to find those articles) about the ridiculous way our (your?) Congress has acted to update our tax laws. By including tax code provisions in a highway bill, a mass transit bill, and a trade package bill- plus within the Bipartisan Budget Act and the PATH (Protecting Americans from Tax Hikes) Acts. (Those last two were, indeed, logical places to regulate taxes.)
There is a chance that the lame duck Congressional session may act on some tax regulations, but given that these folks work about 1 day a week- and then complain how many lazy folks are out across the US not entering the workforce (that is the pot calling the kettle black)- I am not sanguine they will. So, unless they do- this will be the last year that mortgage insurance will be deductible and foreclosed home debt will not be a taxable situation, among a few other items that expire this calendar year.
But, I figured it would be helpful if I combined all these changes into a coherent mass (which our legislators clearly have not), so you can be prepared file your 2016 taxes. (Remember, you file your taxes for 2016 by April 2017. Oh- and if you are a business, the odds are the date your taxes are due, also changed. More on that in this series.)
Please note- this piece turned out to be very long. So, I’ve split it up into seven separate blogs.
Students and Teachers (PATH Act provisions)
Students got a permanent change for the deductibility of tuition via the American Opportunity Tax Credit. This provides up to $ 2500 of tax credits for lower-income filers for the first four years of higher education. (In addition, it is possible that 40% of the unused credits can be converted to a refund- if no other taxes are owed.) As long as the student is enrolled at least half time, for one term of the year, and has not been convicted of drug violations- this credit is available. The real change to the program is that filers must now include the EIN of the college or university involved- plus they must demonstrate they paid the tuition and fees they claim; one should no longer use the amounts institutions list on the 1098-T form.
On the other hand, the tuition deduction for other students will expire at the end of this year. Oh, and that generous (sic) deduction teachers get for buying supplies for their students that schools don’t supply is now permanent- all $ 250 of it. (Most teachers spend at least twice that!)
Pensions and IRA
Folks older than 70.5 years of age no longer have to rush to transfer their IRA (or portions thereof) to charity, because that charity provision is permanent. (This decision was included in the PATH Act.)
Further note that the IRS demands that these transfers not be rollovers. Instead, one must employ a trustee to transfer the funds; and that trustee cannot hand the taxpayer the funds to deliver to the charity desired. If that happens, the tax exemption is lost. I am sure you will not be surprised when I remind you that there must be a contemporaneous acknowledgement (that means a timely receipt) from the charity for that deductible donation or transfer.
Part 2 of this series continues tomorrow.
We send our stuff off to our “tax guy” to take care of things, but I always like to have a few questions for him…thanks for helping me out with that! (And having been a classroom teacher, you are spot on that teachers spend far more than $250 out of pocket. Every little bit helps, I guess.)
Susan recently posted..Unconventional Christmas Songs: ‘Zat You, Animated Donald Trump?
By the end of the series, you will have lots of recommendations for your tax guy or gal.
Crikey! It’s all so complicated!
So many poiticians say they’ll introduce a simpler system, but they all seem to find it’s a bigger beast than they are!
(hashtag headache!)
The Great Gordino recently posted..If You Fail By Trying To Do, Then Keep On Failing, And Hooray For You!
Remember, Gordon, one person’s loophole is another’s dire necessity. Until we realize folks will be dusappointed, the loopholes win out!
Lots of detailed info – makes me realize how much I DON’T know! LOL Thanks for being a great resource!
There are six more days of this. By the end, you should be an expert!
Of course, with a certain person slated to become President next January, the tax preparing business may become VERY interesting after this tax season.
Yes, Alana. I am daily certain I will doing a significant amount if study during 2017. But, then again, Congress has not a talky proven to have a passing record for the past decade. Talk? Yes! Action? Who are we kidding?