There’s a group of tax breaks that are constantly scheduled to expire, but that keep getting extended by Congress for another year or two. These tax breaks are collectively referred to as “tax extenders.”
Several of the “tax extender” deductions and credits were set to expire after 2020…but guess what happened. Yep, Congress kicked the can down the road once again and renewed many of them on a temporary basis. Most of the extended tax breaks are for businesses, but several of them impact individual taxpayers.
Tax breaks for individuals that were extended until the end of 2021 include the:
- Mortgage insurance premiums deduction;
- Health coverage tax credit for medical insurance premiums paid by certain Trade Adjustment Assistance recipients and people whose pension plans were taken over by the Pension Benefit Guaranty Corporation;
- Nonbusiness energy property credit for certain energy-saving improvements to your home (e.g., new energy-efficient windows and skylights, exterior doors, roofs, insulation, heating and air conditioning systems, water heaters, etc.);
- Fuel cell motor vehicle credit;
- Alternative fuel vehicle refueling property credit; and
- Two-wheeled plug-in electric vehicle credit.
- The exclusion for forgiven mortgage debt was also renewed through 2025 (although the maximum amount that can be excluded is reduced from $2 million to $750,000).
In addition, the 26% rate for the residential energy efficient property credit was extended through 2022 (the credit applies to the cost of solar electric property, solar water heaters, geothermal heat pumps, small wind turbines, fuel cell property, and qualified biomass fuel property). The rate was previously scheduled to drop to 22% in 2021, but now it won’t be reduced until 2023. The credit is then set to expire after 2023.
Two tax breaks for individuals were made permanent, too. First, the 7.5%-of-AGI threshold for deducting medical expenses won’t be raised. It was scheduled to jump to 10% after 2020. The exclusion for state or local tax benefits and reimbursement payments provided to volunteer firefighters and emergency medical responders is now a permanent tax break as well.
