With congress returning to work this week, there are a few items that are still up in the air for tax year 2014. The most pressing issue (at least in relationship to taxes) is the topic of tax extenders. These extenders expired Dec 31, 2013 and unless legislation is put in place this expiration could be costly for many taxpayers.
The list below outlines some of the most impactful expired provisions, but it is not exhaustive.
- The state and local sales tax deduction.
- The deduction for mortgage insurance premiums as interest.
- The deduction for qualified tuition and related expenses.
- The $250 deduction for certain expenses of elementary and secondary school teachers.
- The Work Opportunity Tax Credit.
- The increase and expansion of §179.
- The Research and Experimentation Tax Credit.
- The MACRS 15-year straight line cost recovery for qualified leasehold, restaurant and retail improvements.
What’s the impact?
Most of you live in states that do not have a state income tax, so the expiration of the state and local sales tax provision would have a huge impact on your taxable bottom line. The retraction of the higher section 179 expense allowance would also impact folks who are small business owners. The bottom line is the expiration of these tax extenders is costly.
As mentioned in my last blog post, it’s imperative to proactively plan around taxes to achieve financial success. Planning while these provisions are still unknown for tax year 2014 can be difficult. As congress returns to work for this lame duck session, we will have to sit tight and wait for congress to make their move….or not.
This uncertainty puts the taxpayer in a difficult position. While there is no right or wrong answer as to planning with or without the extenders, the most important detail is the illumination of the issue. Some folks may want to plan conservatively and not include extenders, while some may want to include the use of these extenders for 2014 tax planning. Either method is fine. The most important point is to understand the implications.