Your Government at Work

Author: Keith Huggett

Well, it's the end of 2014 and our government has decided favorably on extending certain tax breaks for this year.  In a manner similar to the American Taxpayer Relief Act of 2012,  Congress and President Obama have passed Tax Increase Prevention Act of 2014  to extend several tax credits through the end of December 2014.  So what does this mean for you and your business?

For Individuals:

• The ability to make qualified charitable gifts directly from an IRA and exclude the IRA withdrawal from income.You must be at least 70½ years old at the time of the gift, the gift must go directly to the charity from the IRA trustee, the gift counts towards your Required Minimum Distribution for the year of the gift and the maximum gift allowed is $100,000 per year.  

• You can deduct state and local sales taxes rather than state and local income taxes.  This provision is particularly important for those taxpayers living in the seven states that don’t currently assess an income tax.

• Teachers can deduct up to $250 in unreimbursed classroom expenses.

  Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.

• The above-the-line deduction for couples with a modified AGI of $130,ooo or less and  $2,000 for couples between $130,000 and $160,000.  For single taxpayers, the breakpoints are $65,000 and $80,000.  

• Qualified Mortgage Debt- up to $2 million dollars (married filing jointly) or $1 million for married filing separately, can be excluded from income.

For businesses:

• You can claim credits for expenses related to research & development activities, for providing low-income housing structures and for businesses that employ active duty service members.

• If you have hired certain members of targeted groups, you can claim the Work Opportunity tax credit, which is equal to 40% of a portion of the first-year wages paid.

• If you purchased any qualified assets, the accelerated depreciation deduction, allows your companies to deduct 50% of the cost of a qualified asset in the year it is acquired.

• The exclusion of 100% of the gain on qualified small business stock is extended to include stock acquired in 2014 and held for more than five years.  This exclusion is scheduled to revert to 50% for qualified stock acquired after 2014.

For a complete listing of the credits, extenders, and deductions available, please take a look at the Tax Increase Prevention Act of 2014. If you have any questions regarding how these tax extenders will affect either you or your business, please contact us.  Our tax planning specialists are able to illustrate the changes in the tax code and how it will affect you.