Several tax breaks are scheduled to expire at the end of this year. Many of these tax breaks have been extended in the past, but given the current state of affairs in Washington, it's uncertain whether Congress will do so this year.
These are the tax breaks that are scheduled to go away -
Teachers' classroom expense deduction. K-12 teachers have been able to deduct $250 worth of unreimbursed classroom expenses from their gross income, but will not be able to do that for 2014. Those that itemize will still be able to claim those expenses.
Exclusion of cancellation of indebtedness on principal residence. Forgiven debts are treated as taxable income. However, if your principal residence is foreclosed or sold in a short sale, you have been able to exclude the forgiven debt as income if you meet certain conditions. If your home is in foreclosure or a short sale is under way, you may want to make sure the process is completed before the end of the year so you can take advantage of this exclusion.
Mortgage insurance premiums. Homeowners who don't make a 20% down payment typically pay for private mortgage insurance . Those premiums were deductible in 2012 and 2013 but will not be deductible in 2014. Mortgage interest continues to be deductible.
IRA distributions to charity. People older than 70 1/2 are required to take minimum distributions each year from their individual retirement accounts. They have been able to contribute that money directly to charity and not count it as income but will not be able to do so in 2014.
State and local sales tax. Taxpayers who itemize their deductions have had the choice of deducting state income tax or state and local sales tax. This has been particularly advantageous to taxpayers living in states that do not have state income tax like Washington and Nevada or taxpayers who have made a large purchase such as a car or a boat. Beginning in 2014 the option to claim sales tax will no longer be available.
Transit benefits. In 2013, employees can have their employer deduct up to $245 pretax per month on transit benefits such as bus passes or parking. In 2014 the amount that can be deducted for transit benefits drops to $130 per month but the parking deduction remains at $245.
Electric vehicles. Consumers who buy a qualified electric plug-in vehicle may be eligible for a tax credit of up to $7500 depending on the size of the car's battery. That credit will not be available for purchases made in 2014.
Adding energy efficient features to your home. Homeowners have been eligible to take a $500 credit for adding energy efficient features like insulation, dual pane windows, heating and air conditioning systems and hot water heaters to their home. That credit will not be available for purchases made in 2014.
Turner's Tax Service will be happy to answer any questions you may have about the expiring tax breaks and what you can do in the remaining weeks of 2013 to take advantage of them. Please call our office at 530-626-8551 for further information.
These are the tax breaks that are scheduled to go away -
Teachers' classroom expense deduction. K-12 teachers have been able to deduct $250 worth of unreimbursed classroom expenses from their gross income, but will not be able to do that for 2014. Those that itemize will still be able to claim those expenses.
Exclusion of cancellation of indebtedness on principal residence. Forgiven debts are treated as taxable income. However, if your principal residence is foreclosed or sold in a short sale, you have been able to exclude the forgiven debt as income if you meet certain conditions. If your home is in foreclosure or a short sale is under way, you may want to make sure the process is completed before the end of the year so you can take advantage of this exclusion.
Mortgage insurance premiums. Homeowners who don't make a 20% down payment typically pay for private mortgage insurance . Those premiums were deductible in 2012 and 2013 but will not be deductible in 2014. Mortgage interest continues to be deductible.
IRA distributions to charity. People older than 70 1/2 are required to take minimum distributions each year from their individual retirement accounts. They have been able to contribute that money directly to charity and not count it as income but will not be able to do so in 2014.
State and local sales tax. Taxpayers who itemize their deductions have had the choice of deducting state income tax or state and local sales tax. This has been particularly advantageous to taxpayers living in states that do not have state income tax like Washington and Nevada or taxpayers who have made a large purchase such as a car or a boat. Beginning in 2014 the option to claim sales tax will no longer be available.
Transit benefits. In 2013, employees can have their employer deduct up to $245 pretax per month on transit benefits such as bus passes or parking. In 2014 the amount that can be deducted for transit benefits drops to $130 per month but the parking deduction remains at $245.
Electric vehicles. Consumers who buy a qualified electric plug-in vehicle may be eligible for a tax credit of up to $7500 depending on the size of the car's battery. That credit will not be available for purchases made in 2014.
Adding energy efficient features to your home. Homeowners have been eligible to take a $500 credit for adding energy efficient features like insulation, dual pane windows, heating and air conditioning systems and hot water heaters to their home. That credit will not be available for purchases made in 2014.
Turner's Tax Service will be happy to answer any questions you may have about the expiring tax breaks and what you can do in the remaining weeks of 2013 to take advantage of them. Please call our office at 530-626-8551 for further information.
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