New laws extend tax provisions and repeal certain ACA rules
New laws extend certain expired and expiring tax provisions through 2020 and repeal certain Affordable Care Act (ACA) provisions.
Congress passed both the Further Consolidated Appropriations Act, 2020 (HR 1865) and the Consolidated Appropriations Act, 2020 (HR 1158). Together, the Acts provide for funding of the federal government through the end of fiscal year 2020 (September 30, 2020). HR 1865 includes the Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.
The Taxpayer Certainty and Disaster Tax Relief Act extends certain expired and expiring tax provisions through 2020, provides additional disaster relief, and makes other tax law changes.
The SECURE Act modifies rules for retirement plan participants as well as plans themselves and employers that sponsor plans. Most changes are effective beginning in tax year 2020 (TS21).
Finally, HR 1865 repeals certain Affordable Care Act (ACA) provisions.
The Taxpayer Certainty and Disaster Relief Tax Act of 2019 extends a package of tax provisions, most of which expired at the end of 2017. In the past, expired provisions have typically been extended for two years. It’s important to note that this extension generally covers three tax years: 2018, 2019, and 2020. In addition, this extension is unusual because it reaches back retroactively to a tax year with a completed filing season.
The IRS will need to time to release updated forms and schedules impacted by these changes. Look for more information from The Tax Institute's Insights as more information becomes available about how to claim these benefits on tax year 2019 returns and amended or original returns for tax year 2018.
These individual tax provisions are available for 2018, 2019, and 2020.
- Qualified principal residence indebtedness exclusion. The Act reinstates the exclusion of forgiven debt (often resulting from a foreclosure) on the taxpayer’s main residence. The exclusion is claimed on Form 982.
- Deduction for mortgage insurance premiums. Taxpayers who itemize deductions on Schedule A may treat qualified mortgage insurance premiums as deductible mortgage interest.
- Deduction for medical expenses. Taxpayers who itemize deductions on Schedule A may continue to deduct medical expenses that exceed 7.5% of AGI. Previously, the deduction was scheduled to apply only to expenses that exceeded 10% of AGI in 2019.
- Tuition and fees deduction. The up to $4,000 above-the-line deduction will be reinstated for qualified higher education expenses on Form 8917.
- Nonbusiness energy property credit. The up to $500 credit for qualified home energy improvements claimed on Form 5695.
- Note: Form 5695 is also used to claim the residential energy efficient property credit. The REEP is allowed through tax year 2021.
- Fuel cell motor vehicle credit. The $4,000 to $40,000 credit for purchases of new qualified fuel cell motor vehicles (hydrogen fuel-cell vehicles) claimed on Form 8910.
- Alternative fuel vehicle refueling property credit. The credit for certain amounts paid for new qualified alternative fuel vehicle refueling property (for example, electric car charging stations) claimed on Form 8911.
- 2-wheeled plug-in vehicle credit. The up to $2,500 credit for 10% of amounts paid for new qualified 2-wheel plug-in electric vehicles claimed on Form 8936.
- Health coverage tax credit. The credit was previously available through 2019, and has been extended for one year through 2020. The HCTC is for individuals eligible for Trade Adjustment Assistance (TAA) allowances because of a qualifying job loss or individuals between the ages of 55 and 64 years whose defined benefit pension plans were taken over by the Pension Benefit Guaranty Corporation (PBGC). The HCTC is claimed on Form 8885.
- Note: The HCTC is a different credit from the Premium Tax Credit (claimed on Form 8962). The premium tax credit does not expire and remains available for taxpayers who purchase qualifying insurance through a Marketplace and receive Form 1095-A.
Most business provisions were also extended through 2020, but there some that are extended for longer periods, noted below. A few of these provisions were already available for 2019, also noted below.
Extended through 2020:
- Indian employment credit
- Railroad track maintenance credit* available through 2023
- Mine rescue team training credit
- Classification of certain race horses as 3-year property
- 7-year recovery period for motor sports entertainment complexes
- Accelerated depreciation for business property on an Indian reservation
- Special expensing rules for certain productions
- Empowerment zone tax incentives
- American Samoa economic development credit
- Biodiesel and renewable diesel incentives* available through 2022
- Second generation biofuel producer credit
- Credits with respect to facilities producing energy from certain renewable resources
- Production credit for Indian coal facilities
- Energy-efficient new homes credit
- Special allowance for second generation biofuel plant property
- Energy efficient commercial buildings deduction
- Special rule for sales or dispositions to implement FERC or state electric restructuring policy for qualified electric utilities
- Excise tax credits relating to alternative fuels
- Oil spill liability trust fund financing rate
Already available for 2019, and extended for 2020:
- New markets tax credit
- Employer credit for paid family and medical leave
- Work opportunity credit
- Certain provisions related to beer, wine, and distilled spirits
- Look-thru rule for related controlled foreign corporations
ACA Provisions Repealed
The bill repeals three Affordable Care Act taxes that had already been delayed:
- The “Cadillac” tax on high cost health benefits, to be paid by employers or insurers (the Cadillac tax had been delayed but was scheduled to first go into effect in 2022)
- The 2.3% excise tax on medical devices (the medical device tax has not been in force since 2014, and was scheduled to go back into effect in 2020)
- The excise tax on health insurance, sometimes called a HIT or sales tax on health insurance (has not been in force since 2016, and was scheduled to go back into effect in 2021)
Originally published in the 12/26/19 special edition of TAX in the News