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Tax Tip of the Week | No. 321 | Buried Tax Law Changes – Part 2 September 23, 2015

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Tax Tip of the Week | September 23, 2015 | No. 321 | Buried Tax Law Changes – Part 2

A new temporary highway funding bill recently became law. Buried within this temporary bill (the highway money runs out again October 29, 2015) are several tax law changes that have nothing to do with highway funding. Most of the tax law changes are effective after December 31, 2015 or for the 2016 tax year.

Last week we took a look at some due-date changes and FBAR reporting changes.  This week we will take a look at two other significant tax law changes.

Mortgage Interest Reporting

Lenders must report additional information relating to outstanding mortgage interest. Under current law, lenders must file mortgage information statements to individuals who pay more than $600 in mortgage interest in a year. The new bill requires the statements to include the origination date of the loan, the amount of outstanding principal of the mortgage at the beginning of the year, and the address of the property securing the loan. This additional information is intended to reduce inaccurate reporting in the future. The new reporting elements go into effect for tax year 217, so lenders and servicers don’t have to report the new data elements until January 2018.

Adding the loan balance to Form 1098 will provide the IRS with the information to audit returns where the mortgage balance exceeds the $1,000,000 acquisition debt limit.

Adding the date the loan originated on the Form 1098 will alert the IRS that the homeowner may have refinanced their acquisition debt and may now exceed the $100,000 equity borrowing limit.

Requirement for Consistent Basis Reporting Between Estates and Beneficiaries

The act amends the tax code to mandate that anyone inheriting property from a decedent cannot treat the property as having a higher basis than the basis reported by the estate for estate tax purposes. It also creates a new code section which requires executors of estates that are required to file an estate tax return to furnish information returns to the IRS and payee statements to any person acquiring an interest in property from the estate.

The new law will place additional burdens upon the Executor of an Estate. Statements must now be issued that will identify the value of each interest in property acquired from the estate as reported on the estate tax return. The new basis reporting provisions apply to property with respect to which an estate tax return is filed after the date of enactment. These reporting statements must be issued within 30 days after the estate return was filed.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

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