2014 Tax Law Extensions – Last Minute Gifts From Congress

You Have Up To 11 Days to Take Advantage of These Tax Extensions
Congress gave us 11 days to take action based upon new 2014 tax laws.  Throw in the Christmas holidays, and wasn’t that really nice of the government?  I believe the government is not keeping up with its responsibility to our country when it continually enacts last minute tax law changes, but I will save that soapbox for another day.  For the time being, let’s fill you in on what has been extended through 12/31/14 and potential actions you could take on each.  As always, feel free to reach out to us to discuss specifics.

  • Business Bonus Depreciation.  Businesses can once again deduct up to 50% of the cost of NEW capital equipment placed in service.  If you have already purchased new equipment you have just received a tax gift, assuming you wish to accept it.  If you have a need for new capital equipment in the next several months, you will want to look closely at timing of your needs and whether you can get new equipment placed in service by 12/31/14.
  • Business Section 179 Depreciation.  Businesses can once again expense up to $500K in NEW or USED equipment placed in to service in 2014.  The approach to Section 179 Depreciation will be very similar to bonus depreciation.  However, it is worth noting that Section 179 Depreciation deductions are limited to the extent that you have business profits, so the decision here is a little bit more detailed.
  • Up to $100K IRA to Charity Rollovers.  Taxpayers over age 70 1/2 can make direct rollovers from IRA to a qualified charity.  This can minimize the amount of future IRA required minimum distributions.  Taking the rollover approach can often be more beneficial than taking a distribution and then contributing the same distribution to a charity as there are less moving tax parts and unintended consequences.  More details on this item can be found on our blog post by team member Lauren McKenzie, CPA.
  • Mortgage insurance premiums.  Qualified mortgage insurance premiums are deductible for another year, assuming that you itemized  deductions.
  • $250 Teacher Deduction For Classroom Expenses.  Teachers can more easily deduct up to the first $250 in classroom supply expenses that they incur.
  • Exclusions of up to $2 million in Debt Residence Debt Forgiveness.  Debt that is forgiven is typically included in income.  I know that doesn’t make sense, but it is the way it works.  If you’ve had or will have primary residence debt forgiveness in 2014, you can exclude it from federal (but not necessarily state) income tax.  If you are close to having such debt forgiveness settled, push hard to wrap it up before 12/31/14.
  • Energy Efficient Tax Credits.  Up to $500 in credits (calculated at 10% of associated expenditure) can be claimed for energy efficient improvements to your primary residence.  The devil is really in the details on this one, as if you’ve claimed a credit in the past you may not qualify.  Otherwise, you could consider HVAC, window, door, or insulation improvements before the year is up.