Saturday, January 4, 2014

Some Tax Provisions normally extended are no longer ... Is it Real this time?

In one of the most visible expressions of confusion in tax policy out of Washington D.C. is the treatment of a short list of tax laws that have been repeatedly extended only to expire only to be extended once again. A list of the more common expired tax code provisions is listed here for your reference. These laws expire on midnight December 31st, 2013 unless...once again... the laws are extended.

  • Teacher $250 deduction for qualified classroom expenses.
  • Deduction for state and local general sales taxes (in place of state income tax deduction)
  • Deductibility of home mortgage insurance premiums
  • Tuition and fees deduction
  • 50% additional first year depreciation deduction
  • Tax-free distributions from retirement plans for charitable contributions
Action to take

  • Don't count on it. Please do not plan on receiving any of these tax benefits in 2014. Review your 2013 tax return and adjust your withholdings to account for the additional income you will expose to tax without these deductions.
  • Be prepared for anything. While none of these popular deductions may be available to you in 2014, if the past is any indication these laws may be extended once again. Lack of planned implementation of tax laws make it necessary for us to anticipate (guess) what might happen. So save those receipts!
  • Review your options. The elimination of some of these tax laws does not mean there are not similar benefits in the other areas of the tax code. Here are some examples:
    1. Depreciation. Review Section 179 accelerated depreciation and alternative accelerated recovery methods.
    2. Tuition and fees deduction. Review other educational based tax benefits such as the American Opportunity Tax Credit and the Lifetime Learning Credit.
    3. Charitable contributions from retirement plans. Look at donating investments that have appreciated in value. Review the possibility of matching donations from your employer.

Will we ever return to a time when tax laws are predictable? Who knows for sure. But in the meantime the best you can do is to be as prepared as possible.

No comments:

Post a Comment