As of Friday, December 19, President Obama signed the Tax Increase Prevention Act of 2014 into law. This includes tax extenders for both individuals and businesses. The extensions expire as of December 31, 2014. What will happen for 2015 remains to be seen, but if recent history is any indication, Congress will wait until late in the year to pass tax extenders. The following are some of the more well-known tax extenders for 2014:
Individual Tax Extenders

• Up to $4,000 can be deducted for qualified higher education expenses (although in some cases taking a tax credit is more advantageous to the taxpayer)
• Deducting state and local sales taxes instead of state and local income taxes as an itemized deduction
• $250 can be deducted for supplies for teachers; this is an above-the-line deduction, which means even if the taxpayer does not benefit from itemizing his/her deductions, there is a tax benefit
• Mortgage insurance premiums can be deducted as an itemized deduction
• Tax free-distributions can be made from an Individual Retirement Account (IRA) if donated directly to the charity for taxpayers that are 70 ½ or older; the maximum amount of exclusion is $100,000
• 10% of qualified energy improvements up to a lifetime maximum of $500 can be deducted for non-business energy property
• $2,000,000 of debt forgiveness for a taxpayer’s primary home can be excluded from income; normally, any debt that is forgiven is taxable income
• Up to $250 per month can be excluded for employees that have employers provide them with transit and parking benefit

 
Business Tax Extenders

• Section 179 Deduction allows expensing up to $500,000 for qualified capital expenditures provided that the total expenditures do not exceed $2,000,000; for each dollar over $2,000,000, there is a dollar reduction of the maximum deduction
• Bonus depreciation allows expensing 50% of certain qualified property
• The tax credit for certain qualified research activities
• The work opportunity tax credit
• In certain cases, 100% of the gain on small business stock can be excluded from income
• S-Corporations making charitable contributions of property have more advantageous stock basis reduction rules
• The holding period of 5 years to avoid recognizing built-in gains tax for S-Corporations
• Certain race horses are classified as 3 year property
• New markets tax credit for loans to or investments in low-income communities
• Qualified leasehold improvements, qualified retail improvements, and qualified restaurant buildings and improvements placed into service during 2014 can use a 15 year straight line cost recovery period

 
If you have any questions on these tax extenders, please feel free to reach out to us for more information. 317.782.3070.