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A closer look at the next 1040 schedules and other forms

By Jeffrey Pretsfelder
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The Internal Revenue Service has made drafts of the schedules for Form 1040 as well as some other forms for the 2017 tax year available on its Web site.

Jeffrey Pretsfelder, a senior analyst with Thomson Reuters Checkpoint, highlights some of the key changes. (A text version of these changes is also available, as is a slideshow of the changes to the 1040 itself.

Tax forms
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The Internal Revenue Service has made drafts of the schedules for Form 1040 as well as some other forms for the 2017 tax year available on its Web site.

Jeffrey Pretsfelder, a senior analyst with Thomson Reuters Checkpoint, highlights some of the key changes. (A text version of these changes is also available, as is a slideshow of the changes to the 1040 itself.
Mortgage Deduction
Form 1040—Schedule A, Itemized Deductions
For Line 1, “Medical and dental expenses,” the 2017 standard mileage rate for medically-related use of an auto is 17 cents per mile.

For 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 their spouse was age 65 or 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; it was 7.5 percent of adjusted gross income. For 2017, the amount that has to be subtracted is 10 percent 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,” was, in prior years, entitled “Mortgage insurance premiums.” The deduction for these has been terminated with respect to amounts paid or accrued after Dec. 31, 2016.

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

For Line 21, “Unreimbursed employee expenses,” the 2017 standard mileage rate for business travel is 53.5 cents per mile.

On Line 29, “Limit on itemized deductions,” note that 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.
Series EE savings bonds
Form 1040—Schedule B, Interest and Ordinary Dividends
There are no changes to the form itself.

On Line 1, “Interest,” note that accrued interest on Series EE U.S. savings bonds issued in 1987 is taxable.

On Line 3, “Excludable interest on Series EE or Series I U.S. savings bonds,” note that 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).
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Form 1040—Schedule C, Profit or Loss from Business
There are no changes to the form itself.

Note that on Line A, “Principal business or profession,” certain principal business activity codes have been added or changed.

For Part II, “Expenses,” Line 9, “Car and truck expenses,” note that the 2017 standard mileage rate for business travel is 53.5 cents per mile.

For Part II, “Expenses,” Line 13, “Depreciation and Section 179 expense,” see the slide on Form 4562.

For 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.
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Form 1040—Schedule D, Capital Gains and Losses
There are no changes to the form itself.

Note that the election to roll over gain from an empowerment zone asset is no longer available.
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Form 4562, Depreciation and Amortization
There are no changes to the form itself.

Be aware that, unless Congress acts to extend them, numerous depreciation rules expired at the end of 2016. For example:
--Three-year depreciation for race horses two years old or younger under Sec. 168(e)(3)(A);
--Five-year cost recovery period for certain energy property under Sec. 168(e)(3)(B)(vi)(I) and Sec. 48(a)(3)(A); and,
--Accelerated depreciation for business property on an Indian reservation under Code Sec. 168(j)(8).

Also, note in Part I, “Election to expense certain tangible property under Section 179,” that for tax years beginning in 2017, the maximum Sec. 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 Sec. 179 property placed in service during the tax year exceeds $2,030,000.

And for 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.
The fixed and variable rate (FAVR) methodology, which calculates reimbursement rates based on an individual driver’s location and mileage-specific costs, is the only mileage reimbursement approach recommended by the IRS. FAVR recognizes that owning a car and driving that car incur different costs, and breaks reimbursement calculations into two separate cost categories. Like the IRS Safe Harbor Rate, FAVR reimbursements are paid tax-free under IRS Revenue Procedure 2010-51. This means that both employers and employees avoid paying taxes on the reimbursement amounts.
Form 1040—Schedule E, Supplemental Income and Loss
There are no changes to the form itself.

Note that the 2017 standard mileage rate for miles driven in connection with the taxpayer's rental activities is 53.5 cents per mile.
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Form 1040—Schedule F, Profit or Loss from Farming
There are no changes to the form itself.

For Part II, “Farm Expenses—Cash and Accrual Method,” on Line 10, “Car and truck expenses,” note that the 2017 standard mileage rate for business travel is 53.5 cents per mile.

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Tax formsTax deductionsTax planningTax creditsSection 179 expensing
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Jeffrey Pretsfelder
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