Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Disaster Act)

In addition to the SECURE Act, the DISASTER Act was also signed by President Trump on December 20, 2019 and was included as part of the omnibus spending package, called the “Further Consolidated Appropriations Act, 2020.”

The DISASTER Act extends over 30 provisions of the Internal Revenue Code and is effective generally through December 31, 2020. The tax provisions are effective retroactively to January 1, 2018. The bill extends certain individual and business-related tax provisions, provides tax incentives for energy production and green economy jobs, eliminates the increase in the estate and tax unified credit after 2022 and provides disaster relief.

Following are some of the more significant changes you need to know. For a complete analysis of the new 2019 acts check out our new webinar, “Congress Passes 2019 Year-End Tax Legislation: SECURE Act & Disaster Act”, available on NSTP.org.

• Exclusion from gross income of discharge of qualified principal residence indebtedness: the DISASTER Act extends the exclusion of up to $2,000,000 of debt relief for three years, retroactive to January 1, 2018.
• Treatment of mortgage insurance premiums as qualified residence interest: the eligible deduction is extended for three years retroactive to January 1, 2018. An eligible deduction is:
  • A maximum of $1,000 (reduced to $500 for married taxpayers filing a separate return)
  • The deduction is not allowed if the taxpayer’s AGI exceeded $110,000 (reduced to $55,000 for married taxpayers filing a separate return)
  • In order to qualify the taxpayers must elect to file Schedule A, Itemized Deductions
• Reduction in medical expense deduction floor: the DISASTER Act extends the threshold of 7.5% of AGI for tax years beginning after December 31, 2018 and before January 1, 2021
• Deduction of qualified tuition and related expenses: this provision is extended through 2020. There is an AGI limitation for either the $4,000 or $2,000 deduction amount.
• Nonbusiness energy property: there is a lifetime cap of $500 (which is applicable to those who had previously met the cap) for qualified energy improvements to the building envelope.
  • The building envelope includes:
    • Windows
    • Doors
    • Skylights, and
    • Roofs
  • Energy efficient property includes:
    • Furnaces
    • Boilers
    • Biomass stoves
    • Heat pumps
    • Water heaters
    • Center air conditioners, and
    • Circulating fans