Extending personal and business tax incentives retroactively for 2014
With just two weeks left in the 2014 calendar year, Congress finally passed the much anticipated tax extenders bill extending, for 2014 only, a number of personal and business tax breaks that had expired at the end of 2013. The recently passed bill only extends the provisions through 2014, leaving 2015 to be decided upon by future sessions of Congress. The bill now goes to President Obama, who is expected to sign it into law this week.
The tax extenders bill essentially re-authorized the previous tax extenders bill for one additional year, providing for the extension of many tax breaks through 2014. These include increasing the section 179 expense limits back to $500,000, reauthorizing the Work Opportunity Tax Credit and Research & Development Tax Credit, and reauthorizing many personal tax incentives. Extended personal incentives include the educator expense deduction, mortgage debt forgiveness, deduction of mortgage insurance premiums, the option for the deduction of state and local general sales taxes in lieu of state and local income taxes, deduction of certain tuition and fees, tax-free distributions from IRA plans for charitable giving and more.
For many small and mid-sized businesses, the increase in section 179 limits and the extension of 50 percent bonus depreciation are the two most significant provisions of the bill. Companies that were holding off on certain qualifying capital purchases now have a very short window of time to make qualifying purchases in 2014. For companies that have already made significant qualifying capital investments, the passage and eventual signing of the extenders bill could provide for significant tax savings on their 2014 filings.
From a budget perspective, the largest elements of the extender bill include the Research & Development Tax Credit, The Renewable Energy Production Credit, and the deferral of taxes on certain foreign sourced income.
Provisions included in the bill had previously expired at the end of 2013. The short term of the extensions actually means that these provisions will expire again in two weeks, providing benefit for 2014 tax filings, but again leaving taxpayers to wait on the next act of Congress for 2015 and beyond.The provisions of the bill are retroactive to January 1, 2014.
The late passage of the bill will almost certainly delay the opening of tax season. The IRS Commissioner has not yet announced a start date to the 2015 season. We expect a late January to early February date. If you have any questions regarding the extenders bill and how it may affect your personal or business tax planning, please call our offices.