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Tax Extenders – Which Ones? And When?


There are 55 tax provisions, also know as “extenders” that expired at the end of 2013. In a letter from the Internal Revenue Commissioner sent to the United States Congress, members of the tax writing committees stated that if Congress waits until 2015 to enact tax law changes affecting the tax year 2014, there may be a delay in the opening of tax filing season.

The 2014 filing season opened on January 31, 2014, instead of January 21, due to the 16-day federal government closure in October of 2013. A delay is very possible in 2015 if the decision whether to extend the expired tax provisions is not made before the end of this year.

Several tax extenders that may affect individuals in particular are:

1. Deduction for state and local sales taxes.

This deduction benefited individuals who lived in states without state income tax, such as Nevada. Sales taxes are deducted in lieu of state and local income taxes on Schedule A, Itemized Deductions.

 2. Tax-free distributions from Individual Retirement Accounts for charitable purposes.

Taxpayers who are 70 ½ or older are able to exclude from income up to $100,000 per year when distributions are made directly to certain qualified charities. Seniors who can no longer itemize deductions benefit from this extender.

3. Above-the-line deduction for qualified tuition and related expenses.

Qualifying individuals could deduct qualifying higher education tuition or expenses above-the-line.

 4. Exclusion of discharge of principal residence indebtedness.

The Mortgage Debt Relief Act provided the exclusion from income of up to $2 million of qualified cancellation of mortgage debt on a principal residence.

 5. Bonus depreciation.

This extender provides for the 50 percent bonus depreciation on qualified property purchased and placed in service in a business.

 6. Temporary extension of increase in the maximum amount and phase-out threshold under section 179.

A taxpayer may immediately expense up to $25,000 of Section 179 property, with a dollar for dollar phase-out of the maximum deductible amount for purchases in excess of $200,000 for tax years 2014 and thereafter. The proposal would increase the maximum amount and phase-out threshold to $500,000 and $2 million, respectively.

If Congress does not act on these and other tax extender issues before the end of 2014, and instead reinstates them retroactively sometime in 2015, millions of Americans would be forced to file amended returns to claim these deductions.




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