On December 16, Congress approved the Tax Increase Prevention Act of 2014. The Act provides for retroactive extension of various individual and business tax provisions that had expired at the end of 2013. President Obama has indicated he will sign the bill as soon as it reaches his desk. The most significant provisions are outlined below.
State and local sales tax deduction – Individuals may continue to claim an itemized deduction for state and local sales tax in lieu of income taxes. This provides a benefit to those living in states without a personal income tax such as Florida.
Teachers’ expense – Primary and secondary education professionals may deduct up to $250 above-the-line for qualified expenses.
Mortgage debt exclusion – Income from the cancellation of mortgage debt on a principal residence of up to $2 million ($1 million for married filing separate) can be excluded from income.
Mortgage insurance premium deduction – Qualified mortgage insurance premiums are deductible as interest.
Charitable distributions from IRAs – Individual age 70 ½ and older will be allowed to make tax-free distributions from IRAs to a qualified charitable organization. The amount is capped at $100,000.
Bonus deprecation – Bonus depreciation allows taxpayers to claim an additional first year depreciation deduction of 50-percent for qualifying property. Property must be new, placed in service before January 1, 2015, and have a recovery period of 20 years of less.
Increased Section 179 deduction – Subject to taxable income limitation, taxpayers can immediately deduct up to $500,000 for qualifying asset purchases. The deduction begins to phase out dollar-for-dollar when qualifying asset purchases exceed $2 million.
Research tax credit – Although there has been much debate about making this credit permanent, the credit has been extended through 2014.
Work opportunity tax credit – Employers that hire military veterans and other qualifying individuals can claim a credit as high as 40% of the first $6,000 of first-year wages.
For more information on Congress’ extension of the expired tax provisions, click here to read Skoda Minotti’s Year-End Tax Planning Checklist or contact Jim Forbes, CPA or Jenna Staton, EA at 440-449-6800.