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 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 a lot of them have been straightened out as of 2019 if you should find yourself in the position of having to file 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 maybe, just maybe, all those tax negotiations going on in Congress in November and December 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 resuscitated it.
Then the Bipartisan Budget Act was signed into law on February 9, 2018 and it did what the TCJA failed to do—it extended this tax break for one more year through December 31, 2017. 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.
And 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Yes, the health care mandate has been repealed, but the repeal doesn’t take effect until 2019 so you must still indicate on line 61 of your 2017 tax return whether you had coverage in 2017.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 percent 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, whichever is higher.
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 miss this change if you’re itemizing deductions this year. Line 3 on some 2017 Schedule As might tell you to multiply your adjusted gross income by .10 or 10 percent. 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 percent of your AGI, but the TCJA drops this to 7.5 percent for 2017 and 2018, 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.
And this deduction did eventually expire. You can claim it through 2017, but not in 2018 or later...so far. The deduction might still be resurrected for 2019, but that hasn't happened yet.
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.
And keep in mind that box 5 will go back to being blank for tax years 2018 and later now that this deduction has expired.
If You Use U.S. Mail to Send in Your Return
At least one change for 2017 doesn’t involve the forms themselves but rather where you should send them if you don’t e-file. The IRS has moved…sort of. It’s changed the address where certain taxpayers should file their paper returns.
This change affects you if you’re a resident of West Virginia, Maryland, Pennsylvania, Connecticut, Rhode Island, or the District of Columbia. We’re told that all Instructions for Forms 1040, 1040A, and 1040EZ include the new, updated addresses, but you might still want to send your return by certified mail, return receipt requested, so you can be sure the IRS receives it.
Of course, this isn't an issue if you e-file, as the IRS urges you to do.
Significant Changes for 2018!
These changes and fixes apply to 2017 returns only. Ultimately, the TCJA included so very many changes that the IRS seized the opportunity to totally redesign the 1040 tax return beginning with tax year 2018. This lines and schedules apply only to tax year 2017.
Forms 1040A and 1040EZ are obsolete beginning in 2018 as well.
Your 2018 tax return is probably going to be even more of a challenge, but the dust should settle then for a while...at least until the TCJA potentially expires at the end of 2025.