Several valuable expired tax breaks remain in limbo, and taxpayers are watching Congress closely to see whether these provisions will be revived. While most legislative attention has focused on broad tax reform and Affordable Care Act-related taxes, a handful of individual tax deductions and exclusions quietly expired at the end of 2016. Understanding which breaks lapsed, how they worked, and whether Congress is likely to extend them can help you plan your tax strategy and avoid leaving money on the table.
This article answers one central question: which expired tax breaks matter most to individual taxpayers, and what should you do while their renewal stays uncertain?
What the PATH Act Did and What It Left Unfinished
Congress passed the Protecting Americans from Tax Hikes (PATH) Act in December 2015, making dozens of popular tax extenders permanent. The law locked in provisions such as the enhanced Child Tax Credit and the American Opportunity Tax Credit so they would no longer require annual renewal. A few important breaks for individual taxpayers, however, received only a temporary extension through the 2016 tax year. The IRS summarizes these changes in its overview of the PATH Act tax-related provisions.
Once that 2016 extension lapsed, these expired tax breaks became unavailable unless Congress took further action. The provisions that expired fall into two main categories: education-related deductions and mortgage-related benefits. Each carries real dollar value for qualifying taxpayers, making the question of renewal far more than academic.
The distinction between permanent and temporary provisions is the heart of the problem. Taxpayers who assumed the PATH Act settled every extender were caught off guard when a subset of deductions simply stopped applying after 2016.
The Tuition Tax Deduction and Why It Matters
One of the most notable expired tax breaks is the above-the-line deduction for qualified tuition and related expenses, claimed historically on IRS Form 8917. This tuition tax deduction allowed eligible taxpayers to reduce their adjusted gross income (AGI) by up to $4,000 for higher-education costs without needing to itemize. Taxpayers with an AGI at or below $65,000, or $130,000 for joint filers, could claim the full $4,000 deduction. Those with an AGI between $65,001 and $80,000, or $130,001 to $160,000 for joint filers, qualified for a reduced deduction of up to $2,000.
The tuition tax deduction existed alongside two education tax credits: the American Opportunity Tax Credit and the Lifetime Learning Credit, both detailed in IRS Publication 970. Taxpayers could not claim more than one of these benefits for the same student in the same tax year. In most cases, the American Opportunity Credit delivered the largest tax savings because it provided a dollar-for-dollar reduction in tax liability rather than simply lowering taxable income.
The tuition tax deduction still offered a strategic advantage in specific situations. Because it reduced AGI directly, it could help taxpayers stay below income thresholds that trigger phaseouts on other tax benefits. A lower AGI might preserve eligibility for deductions, credits, or exemptions that would otherwise shrink or disappear at higher income levels.
For taxpayers sitting near those phaseout boundaries, the tuition deduction sometimes produced a better overall tax outcome than taking the Lifetime Learning Credit, even though the credit itself was more valuable in isolation. That kind of trade-off is exactly where coordinated tax advisory services earn their keep, since the right choice depends on a taxpayer’s complete return rather than any single line item.
Mortgage Insurance Premium Deduction: Still Available?
Another significant break that expired after 2016 is the mortgage insurance premium deduction. Under the PATH Act extension, taxpayers could treat qualified mortgage insurance premiums as deductible mortgage interest. This provision allowed homeowners who paid private mortgage insurance (PMI), typically required when a down payment is less than 20 percent, to deduct those premiums on their federal tax return.
The mortgage insurance premium deduction phased out for taxpayers with an AGI between $100,000 and $110,000. Below that range, the full deduction was available; above it, the deduction was eliminated entirely. For many middle-income homeowners, this break reduced the effective cost of carrying mortgage insurance by hundreds or even thousands of dollars per year.
Without congressional action, this deduction is no longer available for tax years after 2016. Homeowners who relied on it to offset PMI costs now face a higher after-tax burden, making the case for renewal particularly pressing.
The standard mortgage interest deduction itself remains intact and continues to be one of the most widely claimed itemized deductions in the tax code. The separate treatment of insurance premiums as deductible interest, however, hinges entirely on whether Congress acts to renew expired tax breaks in this category. Property owners and investors weighing the after-tax cost of financing often benefit from guidance tailored to the real estate sector, where these distinctions affect both personal and business returns.
Mortgage Forgiveness Exclusion: A Narrow Window May Still Apply
The PATH Act also extended through 2016 the exclusion from gross income for mortgage loan forgiveness. Under normal tax rules, when a lender forgives or cancels a portion of a borrower’s debt, the forgiven amount is treated as taxable income, a result reported using IRS Form 982. The mortgage forgiveness exclusion overrode that default treatment, allowing homeowners who went through a short sale, foreclosure, or loan modification to avoid a potentially devastating tax bill on top of an already difficult financial situation.
Congress included a transitional rule when it set the 2016 expiration date. Mortgage forgiveness that occurred in 2017 could still qualify for the exclusion, provided it was granted under a written agreement that the borrower entered into before the end of 2016. This means some taxpayers may be able to benefit from this expired tax break on their 2017 return even if Congress does not formally extend the provision.
That transitional rule is narrow, however. Borrowers whose forgiveness agreements were initiated entirely in 2017 cannot rely on it. For these taxpayers, the status of this break depends on whether Congress includes it in any future package of tax extenders.
How Congress Typically Handles Expired Tax Breaks
Expired tax breaks are not a new phenomenon. Congress has a long history of allowing popular provisions to lapse and then retroactively renewing them, sometimes months or even a full year after expiration. These packages, known informally as tax extenders legislation, often bundle dozens of temporary provisions into a single bill and pass them with broad bipartisan support.
The PATH Act itself was a response to years of frustration with this cycle. By making many provisions permanent, Congress intended to give taxpayers and tax professionals more certainty for planning purposes. The breaks that were left with temporary extensions, however, remain caught in the older pattern of expiration and renewal.
For taxpayers, this creates a planning challenge. Filing a return without claiming an expired deduction is straightforward, but if Congress later renews the break retroactively, an amended return may be necessary to capture the benefit. Staying informed about legislative developments, or working with a CPA who monitors these changes, is the most reliable way to ensure you do not miss out.
What Taxpayers Should Do Right Now
Taxpayers who benefited from any of these expired tax breaks in prior years should take three steps. First, confirm whether you have filed your 2016 return and claimed all eligible deductions, including the tuition tax deduction and mortgage insurance premium deduction, which were still available for that tax year. The deadline for individual extended returns for 2016 was October 16, 2017.
Second, monitor congressional activity around tax extenders legislation. Any renewal of these breaks would likely be included in a broader tax bill, and it could apply retroactively to the 2017 tax year.
Third, consult a qualified tax advisor. The interaction between expired deductions, available credits, and AGI-based phaseouts is complex enough that professional guidance often pays for itself, especially when the rules may change mid-year or after the fact. Pairing tax planning with broader accounting services gives you a single point of accountability for tracking both legislative changes and the amended returns they may require.
Frequently Asked Questions
What are expired tax breaks?
Expired tax breaks are federal tax deductions, credits, or exclusions that Congress authorized for a limited time and that have since lapsed. These provisions remain part of the tax code in name but cannot be claimed by taxpayers unless Congress passes new legislation to extend or renew them.
Is the tuition tax deduction still available?
The above-the-line tuition tax deduction expired after the 2016 tax year. It has not been renewed for subsequent years. Taxpayers seeking education-related tax benefits may still qualify for the American Opportunity Tax Credit or the Lifetime Learning Credit, both of which remain active.
Can I still deduct mortgage insurance premiums?
The mortgage insurance premium deduction expired at the end of 2016 under the PATH Act’s temporary extension. Unless Congress renews this provision, PMI payments are not deductible for tax years after 2016. The standard mortgage interest deduction remains available for qualifying taxpayers.
What happens if Congress renews expired tax breaks retroactively?
If Congress passes a retroactive extension, taxpayers who already filed without claiming the break may need to file an amended return to capture the deduction or exclusion. Working with a CPA ensures you can act quickly once new legislation is signed into law.
Does the mortgage forgiveness exclusion still apply?
The mortgage forgiveness exclusion expired after 2016, but a transitional rule allows some taxpayers to benefit on their 2017 return. The forgiveness must have been granted under a written agreement entered into before the end of 2016. Borrowers whose agreements began entirely in 2017 cannot use this exception unless Congress extends the provision.
How does the PATH Act affect current tax planning?
The PATH Act made many popular tax breaks permanent, which eliminated the annual uncertainty around those provisions. The breaks it extended only through 2016, including the tuition deduction and mortgage insurance deduction, remain subject to the traditional cycle of expiration and potential congressional renewal. Tax planning should account for the possibility that these breaks may or may not return.
