In one of its final acts for the 2013-14 legislative session, Congress passed the Tax Increase Prevention Act of 2014, extending many expired tax provisions retroactively for one year through 2014. Passage also included the Achieving a Better Life Experience Act, which created tax-favored savings accounts for individuals with disabilities and select tax-related offsets.
Of the 50 tax extenders passed, these provisions are deemed most significant:
1. State and local sales tax deduction, allowing individuals to claim an itemized deduction for state and local general sales taxes.
2. Higher education deduction, allowing taxpayers to deduct qualified tuition and fees for post-secondary education.
3. Teachers' classroom expense deduction, allowing primary and secondary education professionals to deduct qualified out-of-pocket expenses up to $250 for the 2014 year.
4. Mortgage debt exclusion, excluding from income the cancellation of mortgage debt on a principal residence of up to $2 million.
5. Mortgage insurance premium deduction, allowing taxpayers to treat mortgage insurance premiums as deductible interest that is qualified residence interest subject to AGI phase-out.
6. Charitable distributions from IRAs, allowing individuals aged 70 1/2 and older to continue being allowed to make tax-free distributions from individual retirement accounts to a qualified charitable organization.
7. Transit benefits parity, keeping the income exclusion for employer-provided mass-transit and parking benefits with a cap at $250 per month.
1. Bonus depreciation, allowing taxpayers to claim an additional first-year depreciation deduction up to 50 percent of the capital expenditure.
2. Code Section 179 expensing, allowing taxpayers to immediately deduct, rather than gradually depreciate, the cost of qualified assets, subject to certain limitations.
3. Research tax credit, allowing taxpayers to claim for increases in business-related qualified research expenditures and for increases in payments to universities and other qualified organizations for basic research.
4. Work opportunity tax credit, allowing eligible employers a credit when hiring military veterans and other qualified individuals.
The Tax Increase Prevention Act of 2014 does not make any of the extenders permanent. The 114th Congress, to be sworn in in January, will have to determine the ultimate fate of the extenders for 2015 and beyond.