While Congress took the extension of many popular tax provisions down to the wire, the Tax Increase Prevention Act of 2014 passed before the end of December. All of the following provisions were among those retroactively extended, and are now effective through the end of 2014. So for those of us doing our financial planning in Texas, we need to get started adding up that sales tax!
Deduction for qualified higher-education expenses
Deduction for classroom expenses paid by educators
Deduction for state and local general sales tax — a big deal for Texans!
Tax-free charitable donations from IRAs
Deduction for mortgage insurance premiums
You may be able to claim an additional first-year “bonus” depreciation deduction, equal to 50% of the adjusted basis of qualified property placed in service during the year. The additional first-year depreciation deduction is allowed for both regular tax and the alternative minimum tax. The basis of the property and the regular depreciation allowances in the year the property is placed in service (and later years) are adjusted accordingly.
Expanded IRC Section 179 expensing limits
Under IRC Section 179, if you’re a small-business owner you can generally elect to expense the cost of qualifying property, rather than to recover such costs through depreciation deductions. The maximum amount that can be expensed for 2014 now remains at $500,000 (the same limit that applied in 2013), rather than dropping to $25,000 had the legislation not passed. The $500,000 limit is reduced by the amount by which the cost of qualifying property placed in service during the taxable year exceeds $2,000,000.
Exclusion of gain–qualified small-business stock
Generally, you’re able to exclude 50% of any capital gain from the sale or exchange of qualified small-business stock provided that certain requirements, including a five-year holding period, are met. However, the temporary increase of the exclusion percentage to 100% that applied in 2013 is now extended to qualified small-business stock issued and acquired in 2014.
Other provisions extended
Other provisions extended by the legislation include:
- The ability to exclude from income the discharge of debt associated with a qualified principal residence
- Provisions related to employer-provided mass-transit benefits
- Special rules for qualified conservation contributions of capital gain real property
- Provisions relating to business tax credits, including the research credit and the work opportunity tax credit