Well, it is December 30th, 2014 and as I sit down to write up the last blog post of the year, I realize how much I have enjoyed writing this year! This blog has brought a lot of traffic my way, I have gained a few clients, engaged in some very interesting conversations with fellow professionals and learned a lot about the roller-coaster social media world! Thanks to my readers from the bottom of my heart!
The conversations around tax planning sessions these days has been how quickly can we file in the coming tax season (hopefully on time!) and of course the hype around the Tax Extenders Bill that Congress passed early this month and President Obama signed soon after. So what was the drama all about?
Individual Tax Extenders:
These are the tax breaks that were set to expire at the end of the year and have been extended through the end of 2014:
State and Local General Sales Tax Deduction: Taxpayers can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A of Form 1040. The taxpayer may either deduct the actual amount of sales tax paid in the tax year, or, alternatively, an amount prescribed by the IRS.
Mortgage Insurance Premiums Treated As Qualified Residence Interest: Mortgage insurance premiums (MIP) are generally charged by your mortgage company if you had a down payment of less than 20% of the loan. Taxpayers can treat mortgage insurance premiums paid during the year for qualified mortgage insurance as qualified residence interest. So you can continue to deduct MIP paid during the year on your Schedule A of Form 1040.
In order to do this, the insurance must be in connection with acquisition debt (mortgage) for a qualified residence, and the insurance contract must have been issued after 2006.
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).
Exclusion From Income of Discharge of Qualified Principle Residence Indebtedness: This is a big one! If you had an outstanding balance on your mortgage & if it was forgiven, this discharge is still generally excludable from your gross income.
Deduction for Qualified Tuition and Related Expenses: You may deduct up to $4,000 of qualified education expenses paid during the year for yourselves, your spouse, or your dependents.
Your maximum deduction is $4,000 if your adjusted gross income for the tax year does not exceed $65,000 ($130,000 in the case of a joint return), or $2,000 for other individuals whose adjusted gross income does not exceed $80,000 ($160,000 in the case of a joint return).
For those with incomes above the maximum threshold, no deduction is allowed.
Tax-Free Distributions from IRA Plans to Charity: A qualified charitable distribution from an individual’s IRA is excluded from the individual’s gross income. If you are 70 1/2 years of age, you can exclude up to $100,000 per taxpayer, per year.
Certain Expenses of Elementary and Secondary School Teachers: If you are an elementary or a secondary school teacher, you can exclude up to $250 of qualified expenses they paid during the year from gross income. If you are filing jointly and are both elementary or secondary school teachers, you can each include $250 in expenses paid.
Parity for Employer-Provided Mass Transit and Parking Benefits: Tax Increase Prevention Act (TIPA) of 2014 extends through 2014 the maximum monthly exclusion amount for transit passes and van pool benefits to $250 per month so that these transportation benefits match the exclusion for qualified parking benefits.
Contributions of Capital Gain Real Property Made for Conservation Purposes: If you contributed to a qualified conservation purpose, your deduction is generally limited to 50% of your adjusted gross income (AGI), minus your deduction for all other charitable contributions. TIPA extends this and also extends the enhanced 100% deduction for individual and corporate farmers and ranchers for contributions of property used in agriculture or livestock production.
There were tax breaks that were not extended, these were: (1) the health coverage tax credit for displaced workers and retirees; (2) the plug-in motorcycle tax credit; (3) the energy-efficient appliance credit; (4) New York Liberty Zone tax-exempt bond financing and; (5) partial expensing of refinery equipment.
Original Post By: Manasa Nadig