33 temporary tax breaks (referred to as “tax extenders”) have been set to expire in 2020. 6 of them are related to individual income taxes.
Cancelled mortgage debt
Cancelled debt is typically included as income. But an exception had been made for cancelled mortgage debt under the Mortgage Forgiveness Debt Relief Act of 2007.
Beginning in 2021, cancelled debt will be again taxable income.
Since 2007, taxpayers have been able to deduct qualifying mortgage premiums under the Tax Relief and Health Care Act of 2006. Starting in 2021, these will no longer be deductible.
Deduction for Qualified Tuition and Related Expenses
This provision allows taxpayers to deduct up to $4,000 of qualified tuition and related expenses for post-secondary education (both undergraduate and graduate) from their gross income.
Starting in 2021, these will no longer be deductible.
Credit for Health Insurance Costs of Eligible Individuals
The credit for health insurance costs of eligible individuals, commonly known as the health coverage tax credit (HCTC), reduces the cost of qualified health insurance for eligible individuals.
Under this provision, eligible taxpayers are allowed a refundable tax credit for 72.5% of the premiums they pay for qualified health insurance for themselves and their family members.
The HCTC was originally authorized by the Trade Act of 2002. These credits will not be available after 2020.
Medical Expense Deduction 7.5% AGI floor
Individuals are allowed to deduct unreimbursed medical expenses above a specific income threshold if they itemize their deductions.
After 2020, under current law, the floor is scheduled to increase to 10% of AGI for all taxpayers.
Benefits for Volunteer Firefighters and Emergency Medical Responders
The Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142) provided an exclusion from gross income of certain benefits for members of qualified voluntary emergency response organizations. These payments include the forgiveness or rebate of state and local income and property taxes or payments by states or their political subdivisions to reimburse for expenses. The exclusion was limited to $30 a month. The provision disallowed any itemized deductions for the state and local taxes otherwise excluded.
This provision was enacted after a 2002 IRS decision that a reduction in property taxes for volunteers who are emergency responders was includible in gross income.
The provision was temporary, effective from the date of enactment (December 20, 2007) through 2010. The provision was allowed to expire as scheduled.
The SECURE Act of 2019, enacted as Division O of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94), reinstated the provision for 2020 and increased the amount to $50 a month.
The reinstated provision is likely to have a wider scope than it previously did because of the reduction in the number of itemizers due to provisions of the 2017 tax act (P.L. 115-97), which is expected to reduce the share of itemizers, previously about one-third of taxpayers, to an estimated 11%.