Popular Tax Breaks Expiring At The End of 2016
I’m a CPA writing about personal finance for parents.
Last year, the Protecting Americans from Tax Hikes (PATH ) Act made permanent a number of expiring tax extenders. Although that legislation thankfully made planning for 2016 a little more certain, there are still a handful of tax provisions that are due to expire at the end of this year.
PATH addressed many critical extenders, such as Section 179 expensing and the research tax credit. With those necessary provisions handled, the stakes this year are much lower. It’s unlikely that the House and Senate will take any action before they adjourn for several weeks leading up to the November elections.
The Joint Committee on Taxation published a comprehensive list of expiring tax provisions for 2016 and coming years. Here are a few that are commonly taken by individual taxpayers.
Mortgage insurance premiums
Currently, taxpayers can treat amounts paid for qualified mortgage insurance as deductible home mortgage interest. The deduction starts phasing out for taxpayers with Adjusted Gross Income (AGI) of more than $100,000 ($50,000 if married filing separately) and is unavailable for taxpayers with AGIs greater than $109,000 ($54,500 if married filing separately).
Medical expense deduction
When the Affordable Care Act was enacted in 2010, one of the ways Congress planned to pay for it was by increasing the threshold for claiming itemized medical expenses from 7.5% of AGI to 10% of AGI. Taxpayers age 65 and older were allowed to keep using the lower 7.5% of AGI threshold through the end of 2016.
A bill passed by the House this month (H.R. 3590) would permanently undo the increase to the threshold for all taxpayers. If enacted, the bill would prevent the increase that is scheduled to tax place in 2017 for seniors and roll back the increase for non-seniors that has been in effect for three years. The bill now goes to the Senate for consideration. Govtrack.us gives it a 29% chance of being enacted.