Changes on Form 1040 and Schedule A of the 2017 Tax Return
Last-Minute Tax Code Changes Had the IRS Scrambling
2017 was a chaotic year in the tax world. The Tax Cuts and Jobs Act (TCJA) went back and forth between the House and the Senate before it was finally signed into law at the end of the year. Then, yet another law, the Bipartisan Budget Act, was enacted two months later in February 2018, and it also included changes to the tax code.
All of this was going on as 2017 tax forms were rolling off the printing presses and being posted online. The Internal Revenue Service had to try to peer into the future to get them just right. Without a crystal ball, the IRS did the best it could. You might have found one or two oddities and glitches on your tax forms as you prepared your 2017 taxes, but that's all been straightened out as of 2021, in case you should find yourself in the position of having to file or amend a previous year's return.
Line 34 of Form 1040—The Tuition and Fees Deduction
Depending on when your 1040 was printed, you might find the somewhat ominous phrase “Reserved for future use” here. Line 34 is the above-the-line adjustment to income for the tuition and fees deduction that expired at the end of 2016.
The IRS thought that all of those tax negotiations going on in Congress that November and December might would renew this deduction for at least one more year. That didn’t happen—at least not under the Tax Cuts and Jobs Act. “Reserved for future use” simply means that this is where the tuition and fees deduction would appear if Congress were to resuscitate it.
The Bipartisan Budget Act (BBA) was signed into law on February 9, 2018, and it did what the TCJA had failed to do—it extended this tax break for one more year, through December 31, 2017 (Subsequent legislation extended the tax break through tax year 2020.) You can still claim it on line 34 of your 2017 tax return after all. Ignore that “future use” comment if you qualify for this credit, and these words happen to appear on your 1040.
If you're filing a late 2017 return, you're fine. The most recent version of that year's 1040 is once again labeled, "Tuition and fees," and it once again tells you to attach Form 8917.
Line 61 of Form 1040—The Health Care Individual Mandate
Yes, the health care mandate has been repealed, but the repeal didn’t take effect until 2019, so you must still indicate on line 61 of your 2017 tax return whether you had qualifying health care coverage in 2017. Don’t jump past the line, thinking it no longer applies.
If you didn’t have coverage, you must still pay the penalty: 2.5% of your adjusted gross income (or a maximum of $2,085) for 2017 based on the number of uninsured adults and children in your household.
The big change here is that the IRS previously accepted and processed returns even if you “forgot” to check this box and just left it blank. Not anymore. Your return will be rejected if you don't address line 61.
Line 3 of Schedule A—The Medical Expenses Deduction
You definitely won’t want to overlook this change if you’re itemizing deductions for the 2017 tax year. Line 3 on some versions of 2017 Schedule A might tell you to multiply your adjusted gross income by .10 or 10%. This is what you would have done if the TCJA hadn’t passed. Not anymore, thanks to retroactive provisions of the new law.
It used to be that you could only deduct medical expenses that exceeded 10% of your AGI, but the TCJA drops this to 7.5% for the 2017 tax year (through the 2020 tax year), which means more of a deduction for you. So, be sure to multiply by 0.075, not .10, regardless of what your tax return says.
Returns have been updated since this glitch, but be alert if you're completing one of the originally printed forms.
Line 13 of Schedule A—The Deduction for Mortgage Insurance Premiums
This is another place where you might see the words “Reserved for future use.” The deduction for mortgage insurance premiums used to go here, but this tax break also expired at the end of 2016, and the TCJA did not breathe new life into it, either—although the IRS thought it might, thus, the vague language again.
Then, February’s Bipartisan Budget Act came to the rescue again. You can still claim a deduction for mortgage insurance premiums paid in 2017, because the BBA did what the TCJA failed to do—it retroactively extended this tax break through December 31, 2017. So, go ahead and claim your mortgage insurance premiums for at least one more year if you qualify, regardless of what line 13 says on your Schedule A.
Box 5 of Form 1098
You’ll need an accurate Form 1098 from your lender to claim the mortgage insurance premiums deduction, and here’s where you might run into a bit of a problem. Many lenders sent these forms out before the Bipartisan Budget Act was passed. You might notice that box 5, where your lender would normally report your premiums, is blank on these initial forms, because there was no such deduction at the time lenders completed them.
But fear not, because the IRS has your back. It ordered lenders to reissue corrected 1098 forms by March 15, 2018. Reach out to your mortgage lender if you never received a corrected statement.