As of December 9, 2014 there are more than 50 temporary tax provisions that have not been extended for 2014. This normally would not be an issue as tax laws change frequently. The problem is that many taxpayers are expecting them to be extended for 2014, but without Congressional action they will not be part of your 2014 tax return. If they do get extended the Internal Revenue Service will have to change hundreds of tax forms and related instructions, and update computer coding to accept, process, and calculate returns. Congress wants the IRS to be ready to accept 2014 returns in January when laws effecting 2014 still have not been finalized. Do not expect the IRS to be capable of pulling this off. The likely scenario is that 2014 returns will begin to be accepted in late February at best.
While it is frustrating to try to plan and project your taxes when laws may be made retroactively, here are a few credits and deductions that may impact your return:
- Educator expense – This $250 deduction for eligible educators spending money on qualified expenses is not currently available for 2014. For purposes of the deduction, eligible educators were defined as teachers, instructors, counselors, principals or aides for kindergarten through grade 12 who put in at least 900 hours during the school year in a school that provides elementary or secondary education.
- Sales tax deduction – Congress allowed taxpayers to deduct sales taxes paid in lieu of state income taxes paid. This was a valuable deduction for those that did not have significant income taxes and itemized deductions on their personal tax return.
- Section 179 depreciation – Prior to 2014 many small business owners were able to fully deduct the purchase of equipment used in their business. This was limited to $500,000 for 2013, but for 2014 this deduction will only be $25,000 unless the temporary tax law is extended.
- Energy efficient improvements – Currently, there is no tax credit available for installation of energy efficient doors, windows, insulation, or roofs. For 2013 the maximum credit was $500.
- Tuition and fees deduction – The tuition and fees deduction of $4,000 expired at the end of 2013. This was an “above the line” deduction (meaning it was available for those that took the standard deduction). Qualified education expenses are tuition and related expenses at an eligible educational institution.
Brian is a CPA at Gamwell Caputo Kelsch & Co., PLLC in Conway, NH and can be reached at 603-447-3356. Brian welcomes any article feedback or questions for future article consideration.