Monday, December 22, 2014

Tax Extenders Legislation - Congress Passes; President Signed

On Tuesday December 16th, the Senate approved a “Tax Extenders” bill previously approved by the House of Representatives.  President Obama signed this bill on Friday December 19th.  The legislation extends for one year a number of tax deductions and credits that had expired on January 1, 2014.

We expect that the following provisions included in the legislation will be relevant for many KOS clients:

  • First-year bonus depreciation of 50% is available for qualified property placed in service before January 1, 2015.  This applies to property the original use of which commences with the taxpayer but not to most real property. 
  • For 2014 the section 179 election can be made to expense up to $500,000 of new or used tangible personal property placed in service in the taxpayer’s trade or business.  A phase-out kicks in when additions of eligible property exceed $2 million for the year. It had previously been reduced to $25,000 for 2014.
  • The research credit and work opportunity credit are extended.
  • The up-to-$250 above-the-line deduction for educator expenses is extended.
  • The exclusion for up to $2 million of debt-discharge income arising from home mortgage debt is extended.
  • The deduction for state and local sales taxes is extended.  (Taxpayers that itemized can deduct the greater of state income taxes paid or sales taxes paid.)
  • Individuals who are older than 70 ½ can make direct transfers of up to $100,000 from their IRA to charities.  Under the provision the amount transferred from the IRA is not included in taxable income nor is the amount treated as a deductible charitable contribution.  But by reducing adjusted gross income this approach can reduce the itemized deduction haircut, the portion of Social Security benefits subject to tax, and may even reduce Medicare insurance premiums.

The above does not list all of the items affected by the extenders legislation.  If you have any questions or seek further clarification please contact your KOS professional.

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