Hello New Year, Good Bye Tax Provisions!
Dec 13, 2014
When the clock strikes midnight on New Year’s Eve, not only will we be welcoming 2014, but we will also be saying goodbye to certain income tax provisions. I’m sure while you are wishing your friends and family a Happy New Year, you will not even give this a second thought. However, now is a good time to look into your position and see if you are in the group of individual taxpayers affected by these changes.
Teachers listen up! As of now, 2013 will be the last year to take advantage of the educator’s expense deduction. For the 2013 tax year, teachers can deduct up to $250 in unreimbursed expenses that they accumulated for school supplies or classroom items. With this nice perk expiring, teachers should try and move any potential 2014 expense into the current year if they haven’t maximized their $250 limit as of yet.
Charitable intent Taxpayers’ who are 70½ or older must take required minimum distributions from their IRA. In 2013, if a taxpayer would prefer, he or she can directly transfer their RMD to a charity, up to $100,000. This distribution will not be a deductible charitable donation, but it also will not count as income, and the really great part is that it does satisfy the required distribution. It helps keep taxable income down and helps taxpayers avoid other phase out regulations that could affect them if their income is high.
Consumer Benefit Taxpayers can usually deduct on their Schedule A income taxes paid to state or local governments. However, a few states do not have income tax or the amount paid is not a significant benefit to the taxpayer. I am in Ohio, so I of course do not know what that is like! For the last couple years, taxpayers could deduct sales tax amounts paid if they are higher than income taxes paid. Starting in 2014, this benefit will also go away.
Relief for Debt Forgiveness When a debt is forgiven, the amount forgiven in most cases will result in taxable income to the borrower. However, in 2013, taxpayers can exclude up to $2,000,000 of forgiveness of debt income if their principal residence is foreclosed on. Certain rules apply to this relief and it may not benefit everyone, but it’s definitely worth considering if you are in this situation.
There are other items set to expire at the end of 2013 for both individual taxpayers and businesses. With December being the heart of tax planning, contact your tax professional to discuss your personal situation and to discuss if deductions that benefit you the most will expire at the year’s end.
By: Jill Blakeman, CPA