A bevy of federal income tax breaks were set to expire at the end of 2020, but the latest pandemic stimulus bill gave some of them new life.
New law: Before the CAA, an unfavorable income phase-out rule applied to the Lifetime Learning Credit, which can be worth up to $2,000 annually. For 2021 and beyond, the new law aligns the phase-out rule for the Lifetime Learning Credit with the more favorable phase-out rule for the American Opportunity Credit, which can be worth up to $2,500 per student. In turn, the CAA repeals the college tuition write-off for 2021 and beyond.
Mortgage insurance premium write-off extended You can treat premiums for qualified mortgage insurance on debt to acquire, construct, or improve a first or second residence as deductible qualified residence interest. The deduction is phased out for higher-income individuals.Liberalized rule for calculating 2020 refundable child credit and earned income tax credit You can collect so-called refundable tax credits even if you have no federal income tax liability.
New law: The CAA extends this break to cover qualifying student loan debt payments made under Section 127 plans through 12/31/25. New law: For plan years ending in 2020 and 2021, the CAA allows employers to extend healthcare FSA and dependent care FSA grace periods for up to 12 months into the following plan year. For these plan years, both types of FSA plans can apparently also allow the carryover rule in addition to the grace period rule — although this is not entirely clear. We need IRS guidance.
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