Tax Provisions in Bipartisan Budget Act of 2018

| 2/15/2018

The Bipartisan Budget Act of 2018, signed by President Donald Trump on Feb. 9, includes renewal of many tax extenders that were not addressed by the 2017 Tax Cuts and Jobs Act. A number of items were retroactively extended through 2017 but have not yet been extended for 2018. These significant items were extended through 2017:

  • Energy credits, including:
    • Credit for certain nonbusiness energy property
    • Credit for residential energy-efficient property
    • Qualified fuel cell motor vehicle credit
    • Alternative fuel excise tax credit
    • Alternative fuel vehicle refueling property credit
    • Biodiesel fuel credit and second-generation biofuel producer credit
    • Credit for construction of new energy-efficient homes
    • Five-year extension and phaseout of energy investment credits through Dec. 31, 2021
    • Energy-efficient commercial buildings deduction
  • Empowerment zone tax breaks, including a 20 percent wage credit, liberalized Section 179 expensing, tax-exempt bond financing, and deferral of capital gains tax on the sale of qualified property
  • Indian employment credit
  • Domestic production activities deduction for Puerto Rico
  • Three-year depreciation for racehorses two years old or younger and seven-year depreciation period for motorsport racing track facilities
  • Mine rescue team training credit and election to expense mine safety equipment
  • Expensing election for costs of film and television production
  • Alternative corporate tax rate for timber gains
  • Above-the-line deduction up to $4,000 for qualified higher education expenses for eligible individuals, which is phased out completely as adjusted gross income exceeds $80,000 ($160,000 for married taxpayers filing jointly)
  • Excluded from taxable income: discharge of indebtedness income up to $2 million ($1 million for married taxpayers filing separately) on home mortgage debt from a qualified principal residence
  • Mortgage insurance premiums deductible as qualified residence interest, with the deduction phased out completely when adjusted gross income exceeds $110,000 ($55,000 for married taxpayers filing separately)

In addition to the extenders, the new law adds the following:

  • An exemption from the excess business tax for philanthropic business holdings for qualifying businesses
  • The establishment of qualified opportunity zones for Puerto Rico
  • Repeal of the rules requiring accelerated estimated payments of corporate income taxes in 2020