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Delayed Refunds? How the PATH ACT Affects You in 2017

Many of the tax changes affecting individuals and businesses for 2016 were related to a new federal law, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), that modified or made permanent numerous tax breaks (the so-called “tax extenders”). To further complicate matters, some provisions were only extended through 2016 and are set to expire at the end of this year while others were extended through 2019.

Here’s what individuals and families need to know about the PATH Act for 2016 and beyond:

  • Section 201 of this Act mandates that no credit or refund for an over payment for a taxable year shall be made to a taxpayer before February 15, 2017 if the taxpayer claimed the Earned Income Tax Credit (EIC), Additional Child Tax Credit (ACTC), or the American Opportunity.
  • If you file your tax return early in the tax season, are due a refund, and claim either the EITC or the ACTC, your refund could be affected. With the PATH Act, the IRS will not release your refund before Feb. 27, 2017 if you’ve claimed one or both of these credits.

Homeowners

  • Taxpayers who itemize deductions may treat qualified mortgage insurance premiums as deductible mortgage interest.
  • The provision had expired after 2014 and is now extended through 2016

PATH Impact: Homeowners can increase their mortgage-related deductions. In 2014, homeowners deducted more than $5.95 billion in mortgage insurance premiums-an average of about $1,400 per homeowner.

Students

  • Students or their parents could deduct up to $4,000 of qualified higher education expenses above the line.
  • This tuition and fees deduction expired after 2014 but is now extended through 2016.

PATH Impact: Whether or not they are able to itemize their deductions, students can deduct some of their tution in fees. In 2014, they deducted more than 3.87 billion.

Green Home Improvers

  • The non-business energy property credit was p to $500 credit for qualified home energy improvements.
  • It had expired after 2014, but is now extended through 2016.

PATH Impact: Homeowners can get up to $500 for certain green improvements to their home. Homeowners claimed more than $518 million in 2014.

Families facing foreclosure

  • The exclusion from gross income of a discharge of qualified principal residence indebtedness expired after 2014.
  • It is now extended through 2016.

PATH Impact: Homeowners facing foreclosure may not have to pay income tax on the forgiven debt.

Gain more insight into future implications of the PATH Act in 2016 and beyond. View more information about the PATH Act here.

How do the changes affect you and what should you do?

The IRS Tax season will begin Monday, Jan. 23, 2017, however, you can still file your tax returns before January 23. Should you claim one of the before mentioned credits, your tax return will not be released until AFTER February 15, 2017 as required by The PATH Act. We strongly urge you to schedule an appointment with us as early as December 30, 2016 to have your tax returns filed in order to avoid the overload of tax returns being processed by the IRS as a result of this law.

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