Expertise Beyond the Numbers

Year End Tax Provisions Update – Here’s What You Need to Know…

On Friday, December 20, 2019 President Trump signed into law the “Further Consolidated Appropriations Act, 2020” (“Act”).  In addition to funding the federal government for 2020, the Act extends over 30 expired tax provisions, repeals three health care taxes and makes changes to retirement plan rules.

The Act also provides welcome news for tax-exempt organizations. The provision under the Tax Cuts and Jobs Act (TCJA) requiring tax exempt organizations to increase their unrelated business income by the cost of providing their employees parking and qualified transportation fringe benefits has been retroactively repealed. Tax exempt organizations should consider amending their 2018 returns to remove these expenses from their unrelated business income.

Some of the provisions impacting individuals that are extended through 2020 include:

  • an exclusion from gross income for the discharge of qualified principal residence indebtedness,
  • treatment of mortgage insurance premiums as interest for purposes of the mortgage interest deduction for certain taxpayers,
  • the reduction in the medical expense deduction floor to 7.5% of adjusted gross income,
  • and an above-the-line deduction for qualified tuition and related expenses for higher education subject to certain adjusted gross income limitations.

The Act extends certain tax credits and incentives including the New Markets Tax Credit, the Employer Tax Credit for paid family and medical leave and the Work Opportunity Tax Credit. Additionally, the Act extends a number of incentives for energy production and efficiency.

The three health care taxes repealed are the excise tax on certain high-cost employer health plans known as the Cadillac tax, the 2.3% medical devise excise tax and the annual fee per participant on health insurance providers.

The retirement plan rule changes encourage retirement savings and allow access to retirement funds during certain life events. The Act increases the age for required minimum distributions from certain retirement accounts to 72 and repeals the maximum age for making IRA contributions. Individuals may withdraw amounts penalty-free from qualified retirement plans and IRAs for births and adoptions.

For further information or if you would like to discuss how these provisions will impact you, please do not hesitate to Contact Us.