On December 16, 2014, the Senate passed a bill to extend a package of expired or expiring individual, business, and energy provisions known as “tax extenders.” The bill, H.R. 5771, known as the “Tax Increase Prevention Act of 2014,” extends the tax breaks retroactively for one year through December 31, 2014. This means that the extenders are set to expire two weeks from today. The bill now goes to President Barack Obama, who is expected to sign it into law this week. The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years, but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” H.R. 5771 includes another bill, the “Achieving a Better Life Experience (ABLE) Act of 2014,” which provides for tax-favored accounts that can be used by disabled individuals to save for disability-related expenses. Please call our office for details of how the new changes may affect you or your business.
Below is a list of the key tax breaks that were extended by bill. Note that this list is not all-inclusive.
Individual extenders
The following provisions which affect individual taxpayers are extended through 2014:
- $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom
- Exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income
- Deduction for mortgage insurance premiums deductible as qualified residence interest;
- Option to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes
- Increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes
- Above-the-line deduction for qualified tuition and related expenses
- Provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 and ½ or older
Business extenders
The following business credits and special rules are generally extended through 2014:
- Temporary minimum low-income housing tax credit rate for nonfederally subsidized new buildings
- Work opportunity tax credit
- 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
- 50% bonus depreciation
- Increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing
- Reduction in S corporation recognition period for built-in gains tax
Energy-related extenders
The following energy provisions are retroactively extended through 2014:
- Credit for energy efficient improvements made to residential property
- Credit for construction of energy efficient new homes
If you would like more details about these changes or any other aspect of the new bill, please do not hesitate to call our office.