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What’s New on the 2017 draft Form 1040 and related forms and schedules–Part II

IRS has released on its website a number of draft tax forms and instructions for the 2017 tax year, including Form 1040 and its related schedules.

This Practice Alert, which appears in two parts, highlights key changes made on the 2017 return. The first Part examined the draft Form 1040 itself. This Part II covers related draft forms and schedules.

For the discussion of the draft Form 1040 in Part I of this Practice Alert, see ¶ 37.

FORM 1040—SCHEDULE A, ITEMIZED DEDUCTIONS

Line 1. Medical and dental expenses. The 2017 standard mileage rate for medically-related use of an auto is 17¢ per mile.

Line 3. Medical expense floor. In prior years, the amount that had to be subtracted from eligible medical and dental expenses, if the taxpayer or his spouse was age 65 are older by the end of the year, differed from the amount that had to be subtracted if the taxpayer was under age 65 by the end of the year. That is, it was 7.5% of adjusted gross income (AGI). For 2017, the amount that has to be subtracted, if the taxpayer or his spouse was age 65 are older by the end of the year, is 10% of AGI, i.e., the same amount that has to be subtracted for taxpayers who are under 65 by the end of the year.

Line 13. Reserved. In prior years, line 13 was entitled “Mortgage insurance premiums.” In those years, amounts paid for premiums for mortgage insurance in connection with acquisition indebtedness with respect to a qualified residence of the taxpayer, were deductible as interest, subject to a phaseout based on AGI. Under current law, that deduction terminated with respect to amounts paid or accrued after Dec. 31, 2016.

Line 17. Gifts to charity, other than by cash or check. The standard mileage rate is 14¢ per mile for use of an auto in rendering gratuitous services to a charitable organization.

Line 21. Unreimbursed employee expenses. The 2017 standard mileage rate for business travel is 53.5¢ per mile.

Line 29. Limit on itemized deductions. Itemized deductions for taxpayers with adjusted gross incomes in excess of the “applicable amount” ($313,800 for joint filers or a surviving spouse, $287,650 for a head of household, $261,500 for a single individual who isn’t a surviving spouse, and $156,900 for marrieds filing separately) may be reduced.

FORM 1040—SCHEDULE B, INTEREST AND ORDINARY DIVIDENDS

General. There are no changes to the form itself.

Line 1. Interest. Accrued interest on Series EE U.S. savings bonds issued in ’87 is taxable.

Line 3. Excludable interest on Series EE or Series I U.S. savings bonds. The exclusion for education-related savings bond interest phases out at higher income levels. For 2017, the phaseout begins at modified AGI above $78,150 ($117,250 on a joint return).

FORM 1040—SCHEDULE C, PROFIT OR LOSS FROM BUSINESS

General. There are no changes to the form itself.

Line A. Principal business or profession. Certain principal business activity codes have been added or changed.

Part II. Expenses. Line 9. Car and truck expenses. The 2017 standard mileage rate for business travel is 53.5¢ per mile.

Part II. Expenses. Line 13. Depreciation and section 179 expense. See entries for Form 4562, below.

Part II. Expenses. Line 27a. Other expenses. Unless Congress acts to extend it, the rule under which taxpayers may elect to deduct costs of certain qualified film, television and live theatrical productions only applies to productions that began before Jan. 1, 2017.

FORM 1040—SCHEDULE D, CAPITAL GAINS AND LOSSES

General. The election to roll over gain from an empowerment zone asset is no longer available.

There are no changes to the form itself.

FORM 4562, DEPRECIATION AND AMORTIZATION

General. There are no changes to the form itself.

Numerous expired provisions. Unless Congress acts to extend them, numerous depreciation rules expired at the end of 2016. For example: (a) 3-year depreciation for race horses two years old or younger under Code Sec. 168(e)(3)(A); (b) 5-year cost recovery period for certain energy property under Code Sec. 168(e)(3)(B)(vi)(I) and Code Sec. 48(a)(3)(A); (c) 7-year recovery period for motorsports entertainment complexes under Code Sec. 168(i)(15) and Code Sec. 168(e)(3)(C)(ii); and (d) accelerated depreciation for business property on an Indian reservation under Code Sec. 168(j)(8).

Part I. Election to expense certain tangible property under Sec. 179. For tax years beginning in 2017, the maximum section 179 expense deduction is $510,000. The $35,000 increase in this amount, that applied to qualified enterprise zone property, expired on Dec. 31, 2016. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $2,030,000.

Part V. Listed property. First-year luxury auto limits for vehicles first placed in service in 2017 are $3,160 for autos and $3,560 for light trucks or vans.

Form 1040—SCHEDULE E, SUPPLEMENTAL INCOME AND LOSS

General. There are no changes to the form itself.

Standard mileage rate. The 2017 standard mileage rate for miles driven in connection with the taxpayer’s rental activities is 53.5¢ per mile.

FORM 1040—SCHEDULE F, PROFIT OR LOSS FROM FARMING

General. There are no changes to the form itself.

Part II. Farm Expenses—Cash and Accrual Method. Line 10. Car and truck expenses. The 2017 standard mileage rate for business travel is 53.5¢ per mile.

Draft of 2017 Schedule A (Form 1040), Itemized Deductions (July 18, 2017). Draft of 2017 Schedule B (Form 1040), Interest and Ordinary Dividends (July 10, 2017). Draft of 2017 Schedule C (Form 1040), Profit or Loss From Business (July 18, 2017). Draft of 2017 Schedule D (Form 1040), Capital Gains and Losses (Aug. 14, 2017). Draft of 2017 Schedule E (Form 1040), Supplemental Income and Loss (Jun. 15, 2017). Draft of 2017 Schedule F (Form 1040), Profit or Loss From Farming (Aug. 2, 2017). Draft of 2017 Form 4562, Depreciation and Amortization (Aug. 14, 2017).

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