Congress Extends Expiring Tax Provisions

By Team HRH | January 5, 2015

The holiday season is almost over and as usual Congress has delayed until the last minute to solidify which tax incentives will be extended for 2014. Fortunately, they were able to pass the Tax Increase Prevention Act of 2014, which was signed into law by President Obama on December 19, 2014, and extends over fifty tax breaks through 2014. We’ve broken out some of the more common extenders that will likely be applicable to many individuals and businesses.
Individual Extenders

Charitable Distributions from IRAs

  • Individuals age 70 1/2  and older will still be allowed to make tax free distributions from IRAs (up to $100,000 annually) to qualified charitable organizations.

Higher Education Deduction

  • An above-the-line deduction is allowed for qualified tuition and fees for post-secondary education (the deduction is phased out for upper income earners).

Mortgage Insurance Premium Deduction

  • Mortgage insurance premiums can be treated as itemized deductible interest on Schedule A.

State and Local Sales Tax Deduction

  • State and local general sales tax can be deducted in lieu of state and local income taxes as an itemized deduction on Schedule A.

Teachers Classroom Expense Deduction

  • Teachers may deduct up to $250 of qualified out of pocket expenses.

Mortgage Debt Exclusion

  • Mortgage debt that is cancelled may be excluded from income up to $2,000,000 for joint filers.

Transit Benefits Parity

  • Up to $250 per month of employer-provided mass-transit and parking benefits can be excluded from income.

Business Extenders

Bonus Depreciation

  • This allows a business to claim an additional 50% first-year depreciation deduction. The amount of the additional deduction is subject to limitations depending on the type of property being depreciated.

Section 179 Depreciation Expensing

  • As in 2013, the cost of qualified assets purchased during 2014 may be immediately deducted. This deduction is limited to $500,000 for businesses which have an overall investment of assets of $2 million or less. Certain assets (such as qualified leasehold/retail improvements) may be limited to lower dollar deduction amounts.

100% Exclusion for Gain on Qualified Small Business Stock

  • This exclusion is allowed on the sale or exchange of qualified small business stock held for more than 5 years by non-corporate taxpayers. Consider forming a new company or acquiring qualifying stock before December 31, 2014 to take advantage of this provision.

Research Tax Credit

  • As in prior years, this credit was extended and may be claimed as a percentage of qualified business-related research expenditures.

Work Opportunity Tax Credit

  • Employers who hire military veterans and other qualified individuals may be eligible for this credit, which typically is equal to 40 percent of up to $6,000 (this may be higher for some veterans) in qualified first-year wages.

Other Extenders

Code Sec. 25C Credit

  • This nonbusiness energy property credit rewards taxpayers who make qualified energy efficient improvements to residential property.

Production Tax Credit

  • This provides a per-kilowatt-hour tax credit for electricity generated by qualified energy resources, and sold by the taxpayer to an unrelated person.

Biodiesel and Renewable Diesel

  • A credit available for the production of biodiesel, and diesel fuel from biomass. The small agri-biodiesel producer credit is also extended.

It is to be noted that these extenders were not made permanent; essentially this lame duck session of Congress is passing that discussion on to the next session of Congress. As always, we will continue to keep you abreast of any changes in tax law that may benefit you with tax savings. Please contact us if you believe some of these extenders may be applicable to you, or if you have questions on how to properly implement them.

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