IRS Will Accept Returns Claiming Newly Renewed Expired Provisions

As reported in the Government Affairs Update for February 12, 2018, a number of tax provisions that had expired will be renewed for 2017 as a part of the budget legislation agreed to in Congress to avert a shutdown of the federal government.

Thirty-four such provisions expired at the end of 2016, and would have been unavailable on 2017 returns.  However, the budget legislation will reauthorize them retroactively to the beginning of 2017.  They will again expire at the end of 2017.

On February 24, 2018, the IRS issued guidance that it will now accept 2017 returns from taxpayers claiming those provisions.  However, any taxpayers who have already filed 2017 returns without claiming those provisions will have to file amended returns.  Unfortunately, amended returns cannot be filed electronically, and can take up to 16 weeks to process, according to the IRS.  See IR-2018-33.   

The reinstated provisions include two of interest to mobility. The first is the exclusion for home mortgage debt that is forgiven.  Under the provision, which was first enacted in 2007, up to $2 million of mortgage debt that is forgiven or eliminated by the lender will not be considered taxable income to the debtor. The second is a deduction for mortgage insurance premiums, which are treated as mortgage interest under a special provision added in 2006.   Such premiums that are allocable to the taxable year 2017 will now be deductible for that year.  Note that if the provision is further extended, in 2018 and subsequent years the deduction will be subject to the tax reform change that limits home mortgage interest deductions to interest on debt not exceeding $750,000.  

How this will impact mobility: Transferees who are entitled to either of these benefits may now file 2017 returns and claim them.

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