Tax Credits on Their Way Out

Legislation in 2019 — the Taxpayer Certainty and Disaster Tax Relief Act — resurrected or extended several income tax breaks. But Congress giveth and taketh away, and several of them will expire at the end of 2020, as noted below:

• Credit for qualified fuel cell motor vehicles. This covers fuel cell vehicles propelled by oxygen and hydrogen, which are chemically combined to create electricity. Currently there is a $4,000 to $40,000 credit for vehicles, depending on their weight.
• The credit for alternative fuel vehicle refueling equipment. This has been a personal and business federal income tax credit for up to 30% of the cost of installing nonhydrogen alternative fuel vehicle refueling equipment (including the credit for a personal recharging station in your garage).
• The credit for two-wheeled plug-in electric vehicles. The 10% federal income tax credit for the purchase of qualifying electric-powered two-wheeled vehicles manufactured primarily for use on public thoroughfares and capable of at least 45 miles per hour is set to expire.
• The credit for energy-efficient home improvements. This credit has been worth up to $500 for those installing certain energy-saving improvements in a principal residence.
• The deduction for qualified tuition and related expenses. You still can deduct qualifying higher education expenses until the end of 2020. The college tuition write-off was resurrected for 2018 and extended through the end of 2020. It does not require itemization.
• Medical expenses deductions. This is not actually disappearing, but the rate is changing: The favorable 7.5% floor for the deduction has been extended through the end of 2020. After that, it will go up to 10%.
• The designation of certain geographic areas as empowerment zones. This complex series of provisions is scheduled to end at the end of the year. However, in some instances, the designation may continue for 10 years after the date of designation.
• The Work Opportunity Tax Credit. This is a federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment. Barring an extension, it will expire at the end of the year.
• The energy-efficient commercial buildings deduction. This will disappear at the end of 2020.

Of course, this is just an introduction to a series of complex topics, so be sure to consult a professional about their applications in your situation. Also, it is very possible that at least some of these will be given extensions as the end of the year approaches, so we’ll be keeping an eye out for developments.