Tax Bill Passed By Congress
Tax Extenders Bill Passed – With time running out, Congress has passed the long awaited tax extenders bill. Although President Obama has not yet signed the legislation into effect, his signature is expected. The bill, officially identified as the Tax Increase Prevention Act of 2014 (HR 5771), extends some very significant tax breaks through the end of 2014 and makes them retroactive to January 1, 3013 when they originally expired. It important to note, however, that the new legislation only covers items that are put into effect before December 31, 2014. At his point, there are no plans to extend the bill’s tax benefits into 2015 and beyond.
Some of the tax saving provisions of HR 5771 are summarized below:
- Mortgage Debt
The tax extenders bill allows homeowners to continue to take advantage of the provisions of the Mortgage Debt Relief Act of 2007 through end of the year. Prior to 2007, if a lender wrote off a mortgage debt, or any portion of it, the forgiven amount had to be reported to the IRS as income. With the passage of the Mortgage Debt Relief Act, qualifying homeowners were allowed an exclusion for forgiven mortgage debt, a tax benefit that has now been extended through the end of 2014.
- Mortgage Insurance
The passage of the tax extenders bill will extend, through the end of 2014, the deduction for premiums paid for private mortgage insurance (PMI). This tax deduction, which is lumped with mortgage interest on the tax return, was established in 2007 and had been in effect though the end of 2013 when it expired. The tax extenders bill will reinstate this tax break by allowing a deduction for mortgage insurance premiums on a homeowner’s 2014 tax return.
- Sales Tax
For taxpayers who itemize deductions, the ability to deduct state and local sales taxes paid in lieu of state and local income taxes has been extended through the end of 2014. This provision could potentially amount to a significant tax savings, especially for residents of certain states who have made large purchases during 2014. Like other provisions of the tax extenders bill, this tax break had expired on December 31, 2013.
- Retirement Plan Distributions
The passage of the tax extender legislation will allow taxpayers who are 70 ½ and older to exclude from gross income up to $100,000 in IRA withdrawals, provided that the funds are transferred directly to an approved public charity. Without this extension, IRA withdrawals would be taxed as ordinary income even if they were contributed directly to charity. This income exclusion for IRA withdrawals is available even for those taxpayers who do not itemize their deductions.
- Education
The passage of the new tax extenders legislation will reinstate the above-the-line deduction for tuition and related educational expenses that expired at the end of 2013. Any qualifying amounts that are paid before the end of the year, for an educational term that starts no later than March 31, 2015, are allowed. The maximum allowable deduction of $4000 has an income phase out, with no deduction allowed for individuals with incomes in excess of $80,000 ($160,000 for married couples).
- Bonus Depreciation
The new tax extender bill allows businesses of any size to claim a 50% bonus depreciation allowance on property that is placed in service before the end of the year. In order to qualify, the newly acquired property must satisfy certain requirements and be placed in original use by the business claiming the tax deduction before December 31, 2014.
- Expensing
One of the biggest benefits of the tax extenders legislation for business owners is the extension of the Section 179 expensing and investment ceiling limits that had originally expired at the end of 2103. The bill reinstates the $500,000 expensing limit and the $2.5 million investment ceiling limit that were in effect until the beginning of the year, replacing the much lower $25,000 limit and $200,000 ceiling which would otherwise have applied to 2014 purchases of qualified property.
Although it is coming in just under the wire, the tax extenders legislation recently passed by both houses of Congress reinstates many valuable tax breaks that had expired at the end of 2013. Once it is signed into law by President Obama, it will allow both individual taxpayers and businesses owners to save valuable 2014 tax dollars. (vallartainfo.com) The bill, aptly named the Tax Increase Prevention Act of 2014, is certainly a welcome holiday treat for many!
If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.