Tax

Congress Passes One-Year Extension for Previously Expired Tax Breaks

December 2014
Author:  Robert Conner

Robert Conner

Director

Tax

Health Care
Manufacturing & Distribution

1801 California Street, Suite 2900
Denver, CO 80202-2606

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With few days remaining before the end of the year, Congress passed and the president signed the Tax Increase Prevention Act of 2014. The legislation provides taxpayers relief for 2014 by retroactively extending nearly all tax provisions that expired at the end of the 2013. Here are some of the key individual and business provisions that will be renewed through December 31, 2014:

Individual Provisions

  • Above-the-line deduction up to $250 for certain unreimbursed expenses of elementary & secondary school teachers
  • Itemized deduction for state & local sales taxes
  • Above-the-line deduction for qualified tuition & related expenses
  • Premiums for mortgage insurance deductible as qualified interest
  • Exclusion of discharge of principal residence indebtedness from gross income for individuals
  • Tax-free distributions from individual retirement accounts for charitable purposes

Business Provisions

  • Tax credit for research & experimentation expenses
  • Section 179 expensing up to $500,000 with $2 million phase-out
  • 50 percent bonus depreciation & election to accelerate AMT credits in lieu of additional first-year depreciation
  • 15-year straight-line cost recovery for qualified leasehold, restaurant and retail improvements
  • Reduction in S corporation recognition period for built-in gains tax to five years
  • Work Opportunity Tax Credit
  • Alternative Fuel & Alternative Fuel Mixture Credit
  • Indian Employment Tax Credit
  • Accelerated depreciation for business property on Indian reservations
  • Special rules for qualified small business stock
  • Basis adjustment to stock of S corps making charitable contributions of property
  • New Markets Tax Credit

Several expired provisions were not extended, including:

  • Health care tax credit for displaced workers
  • Plug-in electrical vehicle credit
  • Partial expensing of refinery equipment
  • Energy-efficient appliance credit
  • New York Liberty Zone tax-exempt bond financing

ABLE Accounts

The extenders legislation also includes a new provision known as the Achieving a Better Life Experience (ABLE) Act, which allows states to establish tax-free savings accounts for certain expenses of severely disabled individuals similar to state Internal Revenue Code Section 529 college savings plans. Specifically, the program allows families of disabled individuals to contribute up to $100,000 to an ABLE account. Withdrawals from the account will be tax-free if used to pay for qualified living expenses of the disabled, such as housing and education. In addition, account balances of $100,000 or less will not cause the disabled individual to lose eligibility for other benefits such as Supplemental Security Income (SSI).

While the extender legislation provides relief for 2014, these tax provisions will expire at the end of 2014. Moving forward, Congress may choose to address expiring tax provisions as part of tax reform, deciding at that time which temporary provisions should become permanent. Congress also could choose to develop yet another tax extender package, extending some or all of the provisions expiring at the end of 2014.

With limited time between now and the end of the year, business and individual taxpayers should contact their tax advisor to discuss the effect of these provisions on their tax plan.

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