Tax Implications of Bipartisan Budget Act of 2018

The Bipartisan Budget Act of 2018 (the Act) was passed by Congress and signed by the President on Friday, February 9, 2018 extending various tax incentives.

These provisions – commonly referred to as “extenders”, provisions extended on a year-to-year basis – generally expired as of December 31, 2016. In most cases, the Act provides taxpayers with an additional year of benefit by retroactively extending these incentives through December 31, 2017.

The following provisions – now extended through 2017 – are expected to be the most pertinent to a large number of taxpayers:

  • Energy efficient commercial buildings deduction (IRC §179D)
  • Credit for energy property (§48; extended through 2021 with phase-down beginning in 2020)
  • Credits for other energy-efficient property, including: residential property, alternative fuel vehicles, and biofuel production (multiple sections)
  • Exclusion of income from discharge of qualified indebtedness related to a taxpayer’s principal residence (§108)
  • Treatment of mortgage insurance premiums as qualified residence interest (§163)
  • Above-the-line deduction (i.e., deductible in computing adjusted gross income) for qualified tuition and related educational expenses (§222)

In addition to the extension of taxpayer-favorable incentives, the Act also expands rules related to charitable contributions, casualty losses, and earned income – all aimed at providing relief to taxpayers impacted by the recent California wildfires. The Act also extends a variety of tax deduction and credits for businesses.

The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) repealed the corporate Alternative Minimum Tax (AMT), and made the credit refundable in 2018 through 2021. However, because of sequester spending limits, prior to the passage of the Act refundable AMT credits were subject to a 6.6 percent sequestration spending reduction. It appears the government suspended the 6.6 percent AMT credit refund reduction for 2018 and 2019. However, the sequester reduction of refundable AMT credits continues to apply to AMT credits refunded in 2020 and 2021.

For more information, please contact your tax advisor.

Contacts

Nathan Clark, Partner | DHG Tax
704.367.5930 | nathan.clark@dhg.com

Eric Hessler, Senior Manager | DHG Tax Tax
703.226.0105 | eric.hessler@dhg.com

 

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