Tax Provisions No Longer Available in 2014
Every year a number of “temporary” tax breaks, credits and deductions expire on December 31st. Lawmakers usually plan on extending them, but they don’t always do so before year-end. At the end of 2013, Congress let 57 so-called tax extenders or tax breaks expire. In theory, Congress could extend these retroactively to the beginning of 2014, but that remains to be seen.
There is discussion in Congress of extending a portion of these for 2014, but their real focus is on a complete overhaul of the tax code. Chances of tax reform appear very low, but it appears these expired deductions and credits may be renewed individually instead of passing a single bill to renew all of the expired provisions. As a result more scrutiny will be placed on each provision. Pressure from businesses and other groups could force action before the November elections because lawmakers have no major incentives to pass them in the last two months of the year.
Here is a list of a few breaks that expired in 2013, and are gone for 2014 unless Congress renews them:
Research and Experimentation Credit (R&D)
- A credit allowing companies that perform certain types of research to receive a tax credit for some of their expenses. The idea was to try to stimulate more domestic R&D and innovation.
Depreciation
- Section 179 expensing for deduction for equipment purchases decreased to $25,000 down from $500,000 in 2013. 50% bonus depreciation also expired.
Work Opportunity Tax Credit
- Business will no longer be able to take a credit for hiring employees who belong to certain groups such as veterans or those receiving certain forms of government aid.
Tax Relief For Underwater Homeowners
- Since 2007, homeowners who both owed more on their mortgage than their house was worth, and for whom the bank decided to forgive some of their loan, were allowed to exclude this amount from taxable income. However starting in 2014, the amount of loan forgiveness on your residence will now be taxable.
$250 Deduction For Teachers
- Elementary and secondary school teachers previously could deduct up to $250 worth of teaching related supplies and expenses from their taxes.
IRA Distributions Made Directly To a Charity
- Taxpayers are no longer allowed to make charitable contributions directly from your IRA accounts. In 2014, you will be required to pay tax on the distribution and report a charitable contribution deduction.
State and Local Sales Taxes
- For the past few years, taxpayers who itemized their deductions had the option of choosing either income or sales taxes as a deduction. Taxpayers in 2014 will only be able to deduct state income taxes.
Private Mortgage Insurance (PMI)
- Homeowners who carry PMI on their mortgage will no longer be able to deduct these costs as itemized deductions.
Credit For Energy-Efficient Home Remodeling
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- Homeowners who make eligible energy-efficient changes to their homes such as new insulation, door and window replacement could take a credit up to $500 for expenses incurred.
Qualified Tuition and Related Expenses
- The above-the-line deduction for qualified educational expenses paid during the tax year. The maximum deduction was previously $4,000, and was subject to phase-outs.
It is shaping up to be another year of wait-and-see on tax policy.
We look forward to speaking with you about these expired provisions or any other tax matters.
Andy Graf