Over 50 benefits in the tax law expired at the end of 2013. As you've probably heard Congress passed a last minute bill to extend most of them to the end of 2014. The President signed this December 19, so this is now official.
Let's get to what you really care about - a Top 10 list of what will save you tax right now this year in this law: (And get on this right away, you only have until December 31 to take action on these)
10. Extension of above-the-line deduction for qualified tuition and related expenses. Most people get more benefit from the American Opportunity or the Lifetime Learning tax credits, but this deduction gives another opportunity that in some cases is more advantageous because in many states it saves on state in addition to federal income taxes.
9. Extension of work opportunity tax credit. This continues to give help to employers who work with their state workforce services office to give hard to employ workers a chance.
8. Extension of tax-free distributions from individual retirement plans for
charitable purposes. This allows people over age 70 1/2 who are required to take a distribution from their IRA or other retirement accounts to choose to donate all or part of that distribution to the qualified charity of their choice.
7. Extension of credit for nonbusiness energy property. You can receive a credit of 10% of the cost of qualified energy improvements, with a maximum credit of $500.
6. Extension of deduction of State and local general sales taxes. If you live in one of the eight states without a state income tax, this is a huge benefit. In other states, if you make a large purchase such as for a vehicle or home improvements, this can benefit you if the total sales tax you pay in the year is higher than the state income tax you pay.
5. Extension of exclusion from gross income of discharge of qualified principal
residence indebtedness. One of the nastier surprises taxpayers get when filing their returns is receiving a 1099 form showing the amount of debt forgiveness as taxable income. This extends just a little longer the relief available when that debt forgiveness was related to your qualified principal residence.
4. Extension of mortgage insurance premiums treated as qualified residence
interest. For most people with adjusted gross income below $110,000 per year, this lets you claim an itemized deduction for the mortgage insurance premiums you pay.
3. Extension of bonus depreciation. This allows businesses to claim a deduction of 50% of the amount of equipment put into service in 2014 along with depreciation on the remaining 50% over its normal taxable life (generally 5-7 years)
2. Extension of deduction for certain expenses of elementary and secondary
school teachers. This is high on my list because it benefits many of my clients, yet it costs the government the least amount of any of these on this list.
1. Extension of increased expensing limitations and treatment of certain real property as section 179 property. This allows small businesses who put less than $2 million of qualified property in service during 2014 to take a deduction for up to $500,000 of it in full in 2014. The special rules that allow expensing for computer software, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property are also extended through 2014.
Here's a bonus item that is not used much, but those who do deserve big kudos! Extension of employer wage credit for employees who are active duty members of the uniformed services. This is a 20% credit given to small employers who keep employees on the payroll when they are called to active duty.
I look forward to working with you on these concepts and more.