Some tax breaks are set to expire after 2016

For over a decade, we have been faced with a long list of popular tax breaks with set expiration dates. In the past, Congress temporarily extended the majority of these tax breaks every few years. In December 2015, President Barack Obama signed the Protecting Americans From Tax Hikes Act Of 2015 (PATH Act), which removed the expiration dates for several (but not all) of these tax breaks – making them permanent. However, the following tax breaks were not made permanent, and are currently scheduled to expire at the end of 2016:

  • Deduction (up to $4,000) for Qualified Higher Education Expenses;
  • Deduction for Mortgage Insurance Premiums as Qualified Residence Interest;
  • Temporary 10 Percent Credit (with a lifetime cap of $500) for Qualified Energy-Efficient Home Improvements (e.g., qualified energy-efficient windows, storm doors, roofing);
  • Income Exclusion for Discharge of Qualified Principal Residence Indebtedness; and
  • The 30 Percent Credit for Qualified Energy-Efficient Fuel Cell Property, Small Wind Energy Property, and Geothermal Heat Pump Property.

Although Congress has traditionally extended a majority of expiring tax breaks in the past, there is no guarantee that it will do so in the future. Regardless of how Congress ultimately addresses these expiring tax breaks, there may be real tax savings available if you take advantage of these provisions before the end of 2016.
One credit to look at is the 30 percent Residential Energy Efficient Property (REEP) Credit for installing certain solar equipment in your residence. This credit applies if you install the qualifying energy-efficient equipment on property located in the U.S. that you use as a residence. The residence does not have to be your “principal residence,” so installations for a second residence or vacation home may qualify. While it does not expire after 2016, it is scheduled to be reduced after 2019. But to take the 30 percent credit for 2016, the equipment must actually be installed no later than December 31, 2016.

Source: Don Farmer, CPA

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