The middle class should not continue to foot the bill for tax breaks for millionaires and billionaires. - Keith Ellison, Congressman, Minnesota
Tax breaks are an excellent financial windfall Americans look up to. They save on a taxpayer’s personal liability. These tax breaks add to the taxpayer’s nest egg in various forms, viz., tax credits, tax deductions, and tax incentives. One of the most popular tax breaks is the ‘First-Time Homebuyer Tax Credit’.
Tax breaks can significantly cut back on a taxpayer's liability. People can deduct costs from their gross income to lower their taxable income. This is called tax deduction.
On the other hand, tax credits can reduce the tax liability of a person dollar-for-dollar. It can be more instrumental in lowering one’s tax burden than deductions. Similarly, tax exemptions can reduce or eliminate taxes applicable to a particular item or type of income.
These tax breaks were a great means to save more out of one’s living expenses.
President Donald Trump and his team of Republicans have proposed a slew of major tax reforms. The proposal’s mainstay is that the Trump administration would reduce income tax rates across the board as well as the number of tax brackets. Tax reduction advantages would trickle down to all strata of the American mass.
However, as a measure to compensate for the lost tax revenue, tax breaks (exemptions, credits, and deductions) would be scaled back.
A lot of these tax breaks are related to business filers. Still, there are several tax breaks that do affect individual taxpayers directly, and we’ll be discussing here about them only.
The latest tax breaks that are about to expire in 2017 are as follows:
In 2017, the medical cost deduction that are provided to people aged 65 and above, including their spouses, can be axed. As per the IRS tax law, normal adjusted gross income (AGI) percentage is 10% to qualify for the tax deductions regarding medical costs. Still, a person is permitted to deduct medical costs above 7.5% of his/her AGI, if he/she is 65 years old or more.
The “Residential Energy Efficient Property Credit” is valued at almost 30% of the overall expenses made to install renewable energy sources in a residential property. Taxpayers can claim credit for a newly-built home or primary residence. However, residential fuel cells don’t come with this tax break. There’s no tax break for installing renewable energy sources in a rental property.
It’s worth almost 10% of the purchase value of any qualified home energy-efficient products with a selling price ranging from $50-$500. Purchase of qualified improvements is an absolute must to claim this credit. These home energy-efficient products should be installed or used in one’s primary residence and not in any other property during the same year.
Taxpayers can itemize their year-round mortgage payments made as part of their mortgage insurance premiums or interests.
This tax break is provided for new, fuel-cell cars or any other motor vehicles that convert chemical energy into electricity directly as propulsion mechanism. Only original buyers of such a vehicle is eligible to claim the tax credit.
The “Qualified Plug-In Electric Drive Motor Vehicle Tax Credit” is provided to buyers of new, qualified, plug-in electric two-wheelers. This kind of motor vehicles are propelled by an electric motor. A rechargeable battery is fitted to these vehicles that can be recharged from an external electricity source.
Taxpayers can enjoy deductions of up to $4,000 for bearing qualified tuition costs and fees for themselves, and their spouse or dependents. They can take advantage of qualified expenses like fees, tuition costs, books, stationeries, equipments, and costs of other necessary course materials, excluding room and board. This tax break is provided even if they’ve paid for these items through loans. These expenses can be claimed as above-the-line deductions before the adjusted gross income is calculated. So, taxpayers are exempted from itemizing these costs on their tax returns to claim the respective tax breaks.
The Congress can extend the tax breaks after they’ve expired. In that case, people can claim the tax breaks on their 2017 tax returns. Meanwhile, they should look for other tax advantages that they may qualify for this spring.