Tax & Accounting News

Congress Signs Tax Extender Bill - Rundown For Individuals, Businesses and Energy Provisions

Congress Signs Tax Extender Bill - Rundown For Individuals, Businesses and Energy Provisions

Congress has extended through 2014 a number tax provisions that were scheduled to expire at the end or 2013. Congress waited until the last minute to pass the extender legislation, meaning to take advantage of many means acting before the year-end. For that reason, TaxBuzz has compiled a list of extenders that will affect individual taxpayer and small businesses.

We realize this is the middle of the holiday season, but we don't want you overlook issues that can shave off hundreds, if not thousands, of dollars in tax liability. You are encouraged to review this short summary and then call one of our professionals for additional details if you believe one or more of the extenders might affect you.

INDIVIDUAL PROVISIONS:

Teacher $250 Above the Line Deduction - Extends through 2014 the up to $250 above-the-line deduction for certain expenses of elementary and secondary school educators that otherwise would have to be itemized.

Discharge of Qualified Principal Residence Indebtedness –

Extends through 2014 the exclusion from gross income for the discharge of qualified principal residence acquisition indebtedness as the result of foreclosure or short sale of the taxpayer's primary residence during 2014.

Maximum Monthly Exclusion Amount for Transit Passes and Van Pool Benefits –

Brings the monthly exclusion of employer-provided mass transit fringe benefits into parity with parking benefits for 2014. As a result the monthly exclusion amount for transit passes and van-pooling increased from $130 to $250 for 2014.

Mortgage Insurance Premiums –

Extends through 2014 the treatment of qualified mortgage insurance premiums as qualified residence interest. This deduction phases out ratably for taxpayers with adjusted gross income of $100,000 to $110,000 (half those amounts for married taxpayers filing separately).

Optional Deduction of State and Local General Sales Taxes –

Extends through 2014 the option to take an itemized deduction for State and local general sales taxes in lieu of an itemized deduction for State and local income taxes. The taxpayer may either deduct the actual amount of sales tax paid in the tax year, or, alternatively, an amount prescribed by the Internal Revenue Service (IRS).

Contributions of Capital Gain Real Property Made for Conservation Purposes -

Extends through 2014 the special rule for contributions of capital gain real property made for conservation purposes. This provision also extends the enhanced deduction for certain individual and corporate farmers and ranchers. A qualified conservation contribution is a contribution of a real property interest to a qualified organization, exclusively for conservation purposes.

Above-the-line Deduction for Qualified Tuition and Related Expenses -

Extends through 2014 the provision that permits an above-the-line deduction for qualified tuition and related expenses for higher education. The deduction is capped at $4,000 for an individual whose adjusted gross income (AGI) does not exceed $65,000 ($130,000 for joint filers) or $2,000 for an individual whose AGI does not exceed $80,000 ($160,000 for joint filers).

Tax Free IRA to Charity Transfers -

Extends through 2014 the provision that permits tax-free direct transfers of up to $100,000 from individual retirement plans to a qualified charity for taxpayer's age 70.5 and older while counting towards the taxpayer's RMD requirement.

SMALL BUSINESS PROVISIONS:

Research Credit -

Extends through 2014 the research and development (R&D) tax credit. The R&D credit generally allows taxpayers a 20 percent credit for qualified research expenses or a 14 percent alternative simplified credit.

Work Opportunity Tax Credit -

Extends through 2014 the work opportunity tax credit that allows employers elect to claim a WOTC for a percentage of first-year wages, generally up to $6,000 per employee, for hiring workers from one of several targeted groups. First-year wages are wages paid during the tax year for work performed during the one-year period beginning on the date the target group member begins work for the employer.

Qualified Leasehold Improvements -

Extends through 2014 the 15-year straight-line cost recovery for qualified leasehold improvements.

Qualified Restaurant Buildings and Improvements -

Extends through 2014 the 15-year straight-line cost recovery for qualified restaurant buildings and improvements.

Qualified Retail Improvements -

Extends through 2014 the 15-year straight-line cost recovery for qualified retail improvements.

Bonus Depreciation -

Extends through 2014 the 50 percent bonus depreciation to property acquired and placed in service during 2014 (2015 for certain property with a longer production period). This will also add $8,000 to the first year luxury auto depreciation limit.

Contributions of Food Inventory -

Extends through 2014 the enhanced charitable deduction for contributions of food inventory of apparently wholesome food for non-corporate business taxpayers.

Section 179 -

Extends through 2014 the increased expensing limitations and treatment of certain real property as section 179 property. The provision would also extend the small business expensing limitation and phase-out amounts in effect from 2010 to 2013 ($500,000 and $2 million) to property placed in service during 2014. These amounts were scheduled to drop to $25,000 and $200,000, respectively. The special rules that allow expensing for off-the-shelf computer software, qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property also are extended through 2014.

Qualified Small Business Stock -

Extends through 2014 the provision that would extend the temporary exclusion of 100 percent of the gain on certain small business stock for non-corporate taxpayers to stock acquired before January 1, 2015, and held for more than five years. This provision also would extend the rule that eliminates such gain as an AMT preference item. See chapter 2.07 in the Big Book of Taxes.

Sub-S Charitable Contribution Basis Adjustment -

Extends through 2014 the provision providing that a shareholder's basis in the stock of an S corporation is reduced by the shareholder's pro rata share of the adjusted basis of property contributed by the S corporation for charitable purposes.

S-corporation Recognition Period for Built-in Gains Tax -

Extends through 2014 the rule reducing to five years (rather than ten years) the period for which an S corporation must hold its assets following conversion from a C corporation to avoid the tax on built-in gains.

ENERGY PROVISIONS:

Credit for Nonbusiness Energy Property -

Extends through 2014 the provision allowing a credit of 10 percent of the amount paid or incurred by the taxpayer for qualified energy improvements, up to $500.

Energy-efficient New Homes -

Extends through 2014 the tax credit for manufacturers of energy-efficient residential homes. An eligible contractor may claim a tax credit of $1,000 or $2,000 for the construction or manufacture of a new energy efficient home that meets qualifying criteria.

If you feel any of these extender provisions might apply to you or your business and have questions, please contact one of the TaxBuzz professionals.

share this post
Search for matches...
Lee Reams, BSME, EA

Lee Reams, BSME, EA

Editor-in-Chief

Besides his role at CountingWorks as an educator and speaker to thousands of accountants nationwide, Lee manages a technical research service for a large group of tax accountants which sharpens his technical skills. Lee served on the Board of Blackline Systems, is a former Board of Director for the California Tax Education Council, is a Past President of the San Fernando Valley Chapter of Enrolled Agents, Member and Past Director for the California Society of Enrolled Agents.

Recommended Professionals

In the face of economic uncertainty, TaxBuzz is the industry's most up-to-date tax information.

Join 60,000 who get our weekly newsletter. No spam.

Need help selecting a firm?

Use our specialized search engine and get matched to the best accounting and tax firm for your needs.

Related Posts

Latest Posts