Late last evening, the Senate passed the bill that extends, through the end of 2014, several key tax provisions that had otherwise expired at the end of 2013. It is expected to be signed by the President next week. These tax provisions include the following:
Business Tax Extenders
The Act extended the following business related tax credits and deductions through 2014:
• Bonus depreciation has been extended through 2014, allowing an additional first year deduction of 50 percent of the cost of the equipment.
• The Section 179 rules have been extended allowing for the expense of $500,000 on acquired property for business use.
• The exclusion from capital gains tax of 100 percent of small business stock sold by an individual.
• The practice of making a reduction in S corporation basis equal to the shareholders share of the adjusted basis of a charitable contribution.
• Reduction in S corporation recognition period for built-in gains tax to five years rather than 10 years.
• The Work Opportunity Tax Credit for hiring of military veterans and other qualified individuals
• The Research Tax Credit
• New Markets Tax Credit
• Enhanced deduction for charitable contributions of food inventory
Energy Tax Extenders
The Act extends through 2014 a number of energy credits and provisions that expired at the end of 2013. Some of the items extended include:
• Credit for nonbusiness energy efficiency property, extended one year.
• Biodiesel and renewable diesel credits are extended.
• The renewable electricity production credit. This includes the wind production tax credit.
• The above the line deduction for Energy efficient commercial buildings has been extended.
Individual Tax Rates
• All current individual marginal tax rates are retained (10, 15, 25, 28, 33 and 35 percent) including the recent increased top rate of 39.6 percent.
School Teacher Expenses Deduction
• Elementary and Secondary teachers can take an above-the-line deduction of $250 in out-of-pocket expenses for educational items for their classroom.
Deduction for State and Local Sales Taxes:
• Taxpayers are allowed an itemized deduction for state and local sales taxes.
• Taxpayers have to choose between deducting state income taxes or deducting state and local sales taxes.
• For the sales tax deduction, they can either keep track of their expenses or use the tables that the IRS provides.
Deduction for Qualified Tuition and Expenses
• This above the line deduction is extended through 2014.
• Taxpayers with income of up to $130,000 (joint) or $65,000 (single) can claim a deduction for up to $4,000 in expenses.
• For taxpayers with income over $130,000 but under $160,000 (joint) and over $65,000 but under $80,000 (single) can take a deduction up to $2,000.
• Taxpayers with income over those amounts are precluded from taking advantage of this deduction.
Mortgage Insurance Deductibility
Homeowners can deduct mortgage interest premiums as though they were mortgage interest payments.