5 Tax Breaks Still Set to Expire in 2014
Teachers’ Deduction for Out-of-pocket Expenditures
I do not know about all states, but in North Carolina, teacher pay and budget cutbacks has been a hot topic. In order to have the supplies that they need, some teachers would pay for expenses with their own money. The federal government allowed an adjustment of up to $250 on the personal tax return. The adjustment would have been located on the front half of your tax return. Although it was small, every little bit helps. If you had previously been benefiting from this adjustment, you may notice a slight increase in tax once it disappears.
2. Exclusion of Income From Forgiven Mortgage Debt
Most of the time, when debt is forgiven, the individual has to take this amount back in as income on their personal tax return. When the housing market bubble burst, many Americans found themselves in situations where they could no longer afford their homes and resorted to programs where the mortgage was modified. In these scenarios, some of the debt was forgiven. The federal government enacted provisions to temporarily make this type of forgiveness exempt from income. With the interest rates down and individual mortgage situations ironing themselves out, we won’t see this happen as often as it did in years past. However, if this provision goes away and the individual finds themselves in this situation, there will be a tax liability now associated with the forgiveness if the provision disappears.
3. Deduction for State and Local Sales Taxes
This deduction was enacted in 2004 to help the individuals living in states that do not impose income tax. Individuals could choose between taking the “state and local tax” or “state income tax withholding” for their Schedule A deduction (whichever is higher). If this disappears, who will feel this the most? The folks that will be impacted are individuals living in states that do not have state income tax and/or individual that do not have state income tax withholdings (on your W-2 or estimated tax payments). You will no longer be able to choose “state and local sales tax”. This could result in little to no deduction in that category if this applies to you. This could be the difference between itemizing and taking the standard deduction.
4. The Deduction for Private Mortgage Insurance (PMI)
Usually, individuals will pay Private Mortgage Insurance if they put down little or nothing towards the initial purchase of their home. Starting in 2007, the government allowed the taxpayer to deduct this just as you would mortgage interest on Schedule A. If this provision disappears, your itemized deduction (Schedule A) would be lower resulting in higher income tax.
5. Section 179
In 2013, the amount of the accelerated depreciation called Section 179 was up to $500,000. In 2014, this amount will drop substantially down to $25,000 per year. This will make a huge impact on business that were purchasing capital assets and previously benefiting from this provision.