How the Bipartisan Budget Act of 2018 Affects Your Tax Return*

Just in case you haven’t watched the news lately, the Senate finally made a bipartisan, long-term budget deal on February 9, 2018. Basically, the government shut down and went MIA for a little while because Congress couldn’t agree on some key budget items. The Senate finally had a meeting of the minds and surprised everyone with their super ambitious plans. The Senate made a decision to fund things like disaster relief and other infrastructure benefits. All of these changes will help average Americans receive some tax breaks. We broke this new law down so you can claim some of these new credits on your tax return.

Who the law helps:

  • Certain disaster victims
  • Certain people whose tax breaks expired and got extended
  • People who have installed energy efficient items in their home

If you had a financial crisis…

You may be able to exclude the amount of debt that was forgiven by your lender at your primary residence from your taxable income on your 2017 taxes.

If you don’t like the mortgage insurance you purchased…

You may be able to deduct your mortgage insurance premiums. This is the amount of money you have to pay for mortgage insurance in case you default on your loan.

If you’re a broke college student…

You or your parents can still deduct college expenses like tuition, books, and other supplies, up to $4,000 even if you only took one class. Keep in mind that the deduction is capped at $4,000 if you come from a household that makes $65,000 ($130,000 for joint filers) a year. If you come from a family that earns $80,000 ($160,000 for joint filers) a year, you can deduct $2,000.

If you went green this year…

You will still be able to claim a credit if you added energy efficient improvements to your home. These types of improvements include things like, energy saving roofs, windows, skylights and doors. You can receive a credit for 10 percent of the bill as long as the purchase qualifies.  Don’t forget that you can get 100 percent of the bill paid if you made a big energy efficient improvement like a high-efficiency water heater or A/C unit. Remember, this only applies to your primary residence, so if you made these changes on a second home or a rental property, you can’t claim this credit. 

If you went REALLY green this year…

You can get a credit back for using fuel cells, distributed wind and geothermal heat pumps at your primary residence.

If you bought a fuel cell powered vehicle…

You may receive a credit up to $4,000 if your vehicle weighs 8,500 pounds or less. If you have a heavier vehicle you might receive more money back, depending on the vehicle’s weight.

If you are a victim of the California Wildfires…

You may be able to access your retirement funds early, claim more deductions for disaster losses and use special rules to measure your earned income. This will help you qualify for the Earned Income Tax Credit. Charity caps were also removed for all other American taxpayers. This way, disaster victims can receive extra monetary assistance this year.

If you are a victim of Hurricanes, Harvey, Irma, or Maria…

You can take money out of your 401k and the IRS will waive the 10 percent tax penalty on early distribution. Business owners will also receive a credit if they paid their employees money during the time of the hurricane. Each business owner will receive 40 percent of their money back, up to $6,000 per employee. This is only for areas that were declared a disaster area between September 21-October 17, 2017.

*Not a tax expert. Please consult your tax advisor.