Many taxpayer friendly tax rules expired on December 31, 2013. Some of these rules have been in effect for years. When favorable provisions expire, Congress will usually act to extend the provisions. Even though 2014 is coming to a close, it is still uncertain whether these tax rules will be extended into 2014 and beyond by Congress and the President.
Many of the provisions below were originally set to expire in 2011, but were extended through 2013 by the 2012 Taxpayer Relief Act. This Act was passed in early 2013, and because of its retroactive effect, the 2013 tax season was off to a late start because tax forms had to be updated, and the IRS had to program its computer systems to handle the changes in the law.
Many business groups have spoken out about how extension of these tax provisions into 2014 and later is “critically important to U.S. jobs and the broader economy.” IRS Commissioner John Koskinen has also stated that late enactment of a law extending these tax provisions will lead to a late start in the upcoming tax filing season, and it could cause many taxpayers to file amended returns if they happen to file their tax returns before Congress extends these tax provisions.
The expired provisions for individuals include:
- the deduction for state and local sales taxes
- above-the-line deduction for qualified tuition and related expenses
- deduction for mortgage insurance premiums treated as qualified interest
- exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income
- $250 above-the-line deduction for certain expenses of teachers
- parity for exclusion for employer-provided mass transit and parking benefits and
- credit for certain health insurance costs.
The expired business provisions include:
- increase in expensing to $500,000 and in investment based phaseout amount to $2,000,000 and expanded definition of Section 179 property
- 50% bonus depreciation
- research and experimentation credit
- work opportunity tax credit
- exceptions under Subpart F for active financing income
- look-through treatment of payments between controlled foreign corporations
- special treatment of certain dividends of regulated investment companies (RICs)
- employer wage credit for activated military reservists
- special expensing rules for film and television production
- special 100% gain exclusion for qualified small business stock
- reduction in S corporation recognition period for built-in gains tax
- election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation
- low-income housing 9% credit rate freeze (extended for allocations made before Jan. 1, 2016)
- treatment of military basic housing allowances under low-income housing credit
- 15-year straight line cost recovery for qualified leasehold property, qualified restaurant property, and qualified retail improvements
- deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
- modification of tax treatment of certain payments to controlling exempt organizations
- accelerated depreciation for business property on Indian reservations and
- Indian employment credit
The expired charitable provisions include:
- enhanced charitable deduction for contributions of food inventory
- tax-free distributions for charitable purposes from individual retirement account (IRA) accounts of taxpayers age 70 1/2 or older
- basis adjustment to stock of S corporations making charitable contributions of property; and
- special rules for contributions of capital gain real property for conservation purposes
The expired energy provisions include:
- credit for construction of energy efficient new homes
- energy efficient commercial building deduction
- construction date for eligible facilities to claim the production tax credit or wind credit
- credit for energy efficient appliances
- credit for nonbusiness energy property
- alternative fuel vehicle refueling property
- incentives for alternative fuel and alternative fuel mixtures
- incentives for biodiesel and renewable diesel
- placed-in-service date for partial expensing of certain refinery property
- credit for electric drive motorcycles and three-wheeled vehicles
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.