Millions of Americans may be eligible for more money off their 2018-19 tax bill thanks to moves by Congress after the government shutdown.
On June 20 USA Today reported, “Mike Thompson, D-Calif., proposed the Taxpayer Certainty and Disaster Relief Act, which would extend a number of expired provisions through 2020.”
The Taxpayer Certainty and Disaster Relief Act should have been approved by April 15 but lawmakers had a backlog to deal with after the Federal government shutdown. There is still a ways to go on this as it hasn’t – yet – been passed.
If the law goes through that taxpayers eligible for the four tax breaks below would be able to update their tax returns for the last financial year and will pay less tax on their income.
This is also going to be a throbbing headache for the IRS which is likely to see millions of revisions to tax returns nationwide as Americans claw back money they may have otherwise had to pay the taxman!
The 4 tax breaks
Not everyone will qualify for these but if you do you could save quite a bit of tax. Essentials in life like medical bills, foreclosure income and college tuition fees could then be considered as tax deductible, saving millions of ordinary Americans a lot of money they may have had to find for the IRS.
The four tax breaks are:
1) Tuition fees for college: If your children are at college or university you will be able to deduct up to $4,000 a year in tuition fees from your income. This is what is known as an ‘above the line deduction’ so you will not have to itemize it. We all hope our kids can do well in education and move forward in life – this tax deduction can help millions of kids get ahead without burdening their folks so much.
2) Medical deductions: If you have medical expenses that go above 7.5% of your adjusted gross income you will be able to deduct ‘qualifying medical expenses’ from your tax filing. That could be a real savior for families who have had high medical bills that year. Medical bills aren’t cheap even for relatively minor problems and the ability to offset such bills from your income could ease many a worry for those who get sick. At the end of the day, no one chooses to have to go to hospital!
3) Foreclosure on property: If your lender has foreclosed on you and you have either sold your property to pay the debt or they have accepted a lower figure than the original debt from the sale, your income from the sale would be disregarded from the sale. This used to be considered income and was taxable or knows the best ways to reduce taxable income. Those selling their homes to pay the bank would have then been hit with a huge tax bill on top of the misery of losing nearly everything they had to the bank. The ceiling on this is $2 million – not for the very rich – but could save people on lower incomes a lot of pain after an already stressful time.
4) People wanting to buy, build or substantially improve their property would be able to deduct the interest from their mortgage or home equity loan from their taxable income. You can also deduct your mortgage insurance premiums from the filing as well, with the total ceiling being $750,000.
Unlike many recent tax breaks these cuts are set to benefit ordinary people on ordinary incomes and could allow millions of Americans to breathe a little sigh of relief when they see their next tax bill.
What do you have to do now?
For the moment it is a case of sitting and waiting to see if Congress passes the law and it is ratified by the President. If the law goes through there is going to be a tax rebate bonanza at the end of the year!
Should the law go through and you qualify for the tax breaks, you should go over to the IRS amended tax returns page here and fill in Form 1040X. Unlike the tax return itself (which you can file online) you will have to fill it in by hand and then mail it to your local IRS office.
Could Congress be about to look after Ordinary Joe through a bunch of helpful tax breaks? That would be news! If it does, watch this space and we will update you as soon as you need to get those 1040X documents in!