SECURE Act could require amended returns

SECURE Act could require amended returns

The SECURE Act was signed into law on December 20, 2019.  While the biggest news from this Act are the changes to retirement plans, including increasing the age at which RMDs begin and removing restrictions for IRA contributions, one of the lesser covered effects was the inclusion of so called “extender” deductions.  This is a group of deductions that had expired, mostly at the end of 2017, that were retroactively reinstated for tax years 2018 and in some cases beyond.  This means, that for certain taxpayers, you may be eligible for deductions on your 2018 return that could not have been claimed when you originally filed.  

Here is a quick summary of the extenders, and some comments on the possibility of amending returns:

  • Mortgage insurance premium (PMI) deduction.  When the TCJA of 2017 expanded the standard deduction, it reduced the number of taxpayers who can itemize.  However, taxpayers who did still itemize in 2018 may want to look at this provision.  This deduction had expired in 2017 but has been extended through 2020.
  • The above the line deduction for qualified tuition and related expenses is back.  For taxpayers who could not claim the American Opportunity Credit or Lifetime Learning Credit, this deduction could have an impact on the return.  Originally expiring in 2017, it has also been extended until 2020.
  • The medical deduction threshold was scheduled to rise from 7.5% to 10% of adjusted gross income, but the SECURE Act extended the 7.5% limit through 2020. 
  • Qualified principal residence indebtedness cancelled debt exclusion- Cancellation of debt is normally includable as taxable income in most circumstances.  However, if you defaulted on a mortgage that was used to buy, build, or substantially improve your primary residence, you may be able to exclude this debt from income.  This provision had expired in 2017.

If you had any of these deductions in 2018, it’s possible that these retroactive changes might make amending your return beneficial.  We can look over your specific situation to see if there would be any benefit to making a change.