Key Tax Breaks Retroactively Reinstated

Once again, Congress acted at the eleventh hour to bring back some expired tax breaks. H.R. 5771, the Tax Increase Prevention Act, was passed and signed into law by President Obama on December 19th. Below is a brief summary of some key tax provisions it retroactively reinstated for 2014.

State & Local Sales Tax Deduction- If you live in a state that doesn't have a state income tax, you have the option to deduct state and local sales tax in lieu of state income tax.

Two Mortgage-Related Deductions- The mortgage insurance premium deduction and the tax exclusion for canceled mortgage debt were reinstated.

Education Deductions- The above-the-line tuition and fees deduction that lets parents (and students) lower taxable income amounts by up to $4,000 is back in place for 2014. So is the $250 classroom teacher expense deduction.

Home Upgrades- Certain energy-efficient home improvements might qualify for dollar-for-dollar tax credits.

Enhanced Easement Incentive For Land Donations- Landowners may qualify to take a deduction as large as 50% of his/her income as a result of gifting real property to land trusts for conservation (it would be 30% otherwise). The deduction for qualifying ranchers and farmers may be as large as 100% of their incomes. The enhanced incentive also allows a donor to carry forward their deductions for 15 years as opposed to 5 years.

Mass Transit Commuter Tax Breaks- Both the parking and mass transit benefits were adjusted slightly upward to $250 per month for the 2014 tax year. If you put in for 100% of your transit costs via your employer's payroll deduction program, you are already in line to claim this retroactively restored benefit, which could provide as much as $576 in 2014 federal tax savings.

IRA Charitable Rollover- This allowed individuals to entirely or partially fulfill their RMD by donating up to $100,000 from that IRA to a qualified charity or non-profit organization. Unfortunately, you aren't allowed a "do-over"; you can't take back the RMD and make an IRA charitable rollover instead.

Let's hope Congress can act a little faster this year as this Act, or some form of it, will need to be passed again for the 2015 tax year. Please contact us for any of your tax related needs as we provide both tax planning and tax preparation services.