How this holiday gift may positively impact your 2014 tax returns.
While most of us were reading about the drama associated with the recently signed $1.1 trillion government spending bill, Congress also passed the Tax Increase Prevention Act of 2014. This is essentially a one-year extension of the individual and business tax breaks that expired at the end of 2013, plus a new savings program for those with disabilities. President Obama is expected to sign the bill.
Here’s the interesting part. Although it is retroactive to January 1, 2014, the law expires in two weeks. That means only your 2014 tax returns filed next year will be impacted.
Major provisions that may impact Bach, James, Mansour & Company clients include:
- Exclusion for discharged home mortgage debt up to $2,000,000.
- Deduction for mortgage insurance (PMI) premiums.
- Ability to deduct either state and local sales taxes or income taxes.
- Tax-free IRA rollover to eligible charities, up to $100,000.
- Tuition and expense deduction of up to $4,000
- School teachers can deduct up to $250 for out-of-pocket classroom expenses.
Some provisions that impact businesses include:
- Maximum $500,000 deduction for certain small business property and software (Section 179 deduction).
- 50% first-year “bonus” depreciation of qualified new equipment.
- Research and development tax credits of up to 20%.
- If you happen to own a NASCAR track, you can expedite depreciation on capital improvements.
The bill was combined with the Achieving a Better Life Experience Act of 2014 (ABLE), which allows disabled individuals to set up tax-free savings accounts that help pay for medical expenses, education, and housing.
Learn more about the Tax Increase Prevention Act
This is a very high level summary of the most relevant items outlined in the Tax Increase Prevention Act. There are more provisions and lots of fine print. Please give me a call if you have any questions about how the Act impacts you and your 2014 tax returns.
Neal Bach, CPA