retroactive tax law changes

[chiver78]

this morning, I sent off scans of all my files to the CPA that prepares my return every year. I actually read through the welcome letter she sent, in case I had any questions. I asked in my message to the CPA, but I'll ask here as well. I'm curious how this will affect my return, and I'm sure others would like to know as well. thanks in advance! 

copied from the welcome letter:

The Further Consolidated Appropriations Act of 2020 was passed in December 2019 and contained retroactive and prospective tax extenders. Throughout this letter you will see some of the highlights. 

Retroactive Tax Laws - Mortgage Insurance Premiums are deductible for 2019 and 2020, and retroactively for 2019. Tuition and fees are also restored as an adjustment to income for 2018-2020, under the rules in place prior. Nonbusiness energy credit was also brought back for years 2018-2020. This credit includes storm doors, windows, insulation, etc, and the $500 lifetime limit still applies. A provision was passed in the SECURE Act that repealed the changes made to the Kiddie Tax in the Tax Cut and Jobs Act, returning the investment income subject to the tax to their original lower rates. Individuals who paid the higher tax in returns filed for the 2018 tax year can file amended returns seeking refunds. 

do I need to amend my return for 2018 to include the mortgage insurance premium, or just include it in the 2019 return? if it goes in to the 2019 return, does that mean I am deducting two years of the premium on the single year's return? 

[TheOtherMe]

PMI is only deductible if you itemize.  Since you are asking, I am assuming you do.

An amended return would be the way to claim the PMI paid in 2018.  You can't include it on the 2019 return.  Your CPA won't let you deduct two years of PMI in 2019 since the PMI paid in 2018 was not paid in 2019.  You are on the cash basis, so your deductions are on the return for the year they are paid.

The 1098 you receive from your mortgage company does get matched.  

[justme]

Hmmm this makes me wonder. I didn't itemize last year but it was because it wasn't enough to go over the standard. I wonder if my PMI would have been enough to push me over?

[chiver78]

I honestly don't remember if I itemized last year, my CPA was concerned that my numbers were so far off for 2018 - I had taken a sizable pay cut to take a job really close to home. 2019 has me back in the right ballpark, at least.

but if I'm amending the return to include a PMI line item, wouldn't I just update the entire return to itemize if I hadn't? or is that not allowed? 

[TheOtherMe]

You can change from the standard deduction to itemizing if it benefits you.  If you can itemize this year, you most likely itemized last year (since you had your house all year).   Your CPA will have a copy of last year's return and can figure that out--for a fee.  Make sure you are getting enough of a refund for the fee.  

I had to check my own return last year but the PMI didn't push me to a place where I could itemize.

[rangerj]

Notes:
You have three years from the LATER of the due date or actual filing date, that is the Statute of Limitations, to file an amended return. Some elections must be made on a "Timely filed return". Further, the return of a married spouse if the Married Filing separately filing status is used would require that the other spouse also use the same deduction method, either standard or itemized. A cost/benefit analysis, as suggested above, would be a good idea.