Say Goodbye to Top Tax Breaks in 2014 (Maybe?)
Unless Congress acts on a new “extenders” tax bill in 2014, as many as 55 tax breaks expired as of the end of 2013. I put “Maybe?” in the title because many of these breaks have expired numerous times since 2001 and it appears likely that many of them will be extended again. Hopefully it will happen before year-end so taxpayers can plan. There was a time when the extension actually happened after the year-end. It definitely made tax planning harder!
For now though, the following top tax breaks are history for 2014:
- Section 179 first-year write-off of equipment purchases drops from $500,000 for 2013 to $25,000 for 2014.
- The 50% first-year bonus depreciation of new assets purchased was generally eliminated for 2014.
- Qualified leasehold improvements and restaurant building improvements placed in service during 2013 could be written off over 15 years. In 2014 this is increased to 39 years.
- Tuition deductions for those who may not qualify for the education credits are gone for 2014.
- Deduction of sales taxes is no longer allowed. This was particularly important for states such as Texas that do not have an income tax.
- IRA transfers of up to $100,000 to charity by an individual over 70 ½ counted toward their RMD (Required Minimum Distribution) for 2013 with no tax costs.
- The 100% exclusion from the gain of qualified small business stock drops to 50% for stocks issued in 2013.
- Forgiven mortgage debts on your principal residence could be excluded from taxable gain up to $2 million of forgiven debt. In 2014 it will now be included in taxable debt unless some other exception applies.
- Residential energy credits could provide a lifetime tax credit of $500. For 2014 this is currently eliminated.
- The health coverage tax credit is also eliminated. For 2013, a tax credit for 72.5% of health insurance premiums was available to eligible individuals who paid more than 50% of the premium for a qualified family coverage plan.
- Mortgage insurance premiums. Previously, a taxpayer could deduct mortgage insurance premiums paid on a principal residence or a second home.
- The Work Opportunity Credit of up to $2,400 for wages paid to newly hired workers from certain disadvantaged groups ($9,600 for a veteran with a service-related disability) expired in 2013.
TAX TIP: Keep in touch with your tax preparer. Most of us will be watching Congress closely the rest of the year.