Recent tax legislation
Just in time for the holidays, Congress has extended many popular tax provisions that significantly impact individuals and businesses. This legislation renews, at least for tax year 2014, a retroactive extension of business and individual tax provisions that expired at the end of 2013, and comes just before taxpayers gear up for the 2015 tax filing season.
Individual Tax Extenders
Extension of deduction for certain expenses of elementary and secondary school teachers: The legislation extends for one year (through 2014) the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid or incurred for books, supplies, computer equipment (including related software and service), other equipment, and supplementary materials used by the educator in the classroom.
Extension of exclusion from gross income for discharge of qualified principal residence indebtedness: Continuing relief for distressed homeowners, the legislation extends for one year (through 2014) the ability to exclude from gross income the amount of mortgage debt on a personal residence discharged as part of a sale, short sale, etc.
Extension of parity for employer-provided mass transit and parking benefits: The legislation extends for one year (through 2014) the $250 monthly maximum exclusion amount for transit passes and van pool benefits so that these transportation benefits match the exclusion for qualified parking benefits.
Extension of mortgage insurance premiums treated as qualified residence interest: The legislation extends for one year (through 2014) the ability of homeowners to treat mortgage insurance premiums (MIP) as deductible interest for purposes of the mortgage interest deduction.
Extension of deduction of State and local general sales taxes: The legislation allows taxpayers in 2014 to elect to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction permitted for state and local income taxes.
Extension of above-the-line deduction for qualified tuition and related expenses: The legislation extends through 2014 the “above-the-line” tax deduction for qualified education expenses. The deduction is capped at $4,000 for individual filers with AGI of $65,000 or less ($130,000 for joint filers) or $2,000 for individual filers with AGI of $80,000 or less ($160,000 for joint filers).
Extension of tax-free distributions from individual retirement plans for charitable purposes: The legislation extends through 2014 tax-free charitable contributions from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per tax year for taxpayers who are at least 70 1/2.
Business Tax Extenders
Extension of research credit: The legislation extends the research credit through 2014.
Extension of temporary minimum low-income housing tax credit rate for non-federally subsidized buildings: The legislation extends application of the temporary 9% minimum credit rate for the low income housing tax credit for non-Federally subsidized new buildings to allocations made before January 1, 2015.
Extension of work opportunity tax credit: The Work Opportunity Credit, which provides businesses with a tax credit for hiring employees from specified groups that historically have had difficulty finding employment, is extended through 2014.
Extension of classification of certain race horses as 3-year property: The legislation extends the 3-year recovery period for race horses to property placed in service during 2014.
Extension of 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements: The special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements for property placed in service in 2014 is extended.
Extension of bonus depreciation: The legislation extends 50% bonus depreciation to property acquired and placed in service during 2014 (2015 for certain property with a longer production period). Taxpayers may continue to elect to accelerate the use of AMT credits in lieu of bonus depreciation under special rules for property placed in service during 2014.
Extension of increased expensing limitations and treatment of certain real property as §179 property: The legislation extends through 2014 the small business expensing limitation and phase-out amounts in effect from 2010 to 2013 – i.e., $500,000 and $2 million, respectively – to property placed in service during 2014. The special rules that allow expensing for computer software, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property also are extended through 2014.
Extension of reduction in S corporation recognition period for built-in gains tax: The rule reducing to five years (rather than 10 years) the period for which an S corporation must hold its assets following conversion from a C corporation to avoid the tax on built-in gains is extended to sales of assets occurring during 2014.
Energy Tax Extenders
Extension of credit for nonbusiness energy property: The 10% credit (maximum of $500) for purchases of nonbusiness energy property is extended through 2014.
Extension of credit for energy-efficient new homes: The credit for the construction of energy-efficient new homes is extended through 2014.
Extension of energy efficient commercial buildings deduction: The “above-the-line” deduction for energy efficiency improvements to lighting, heating, cooling, ventilation, and hot water systems of commercial buildings is extended through 2014.
by Frank Conroy
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