Saturday, December 06, 2014

2014 Extenders Clear the House

For many years now, Congress has contributed to tax uncertainty by extending certain favorable tax provisions on a year by year basis. Thus, for example, in 2014 these extenders have expired. Neither the IRS, who has to prepare 2014 forms and computer programs, nor taxpayers, who may want to take advantage of these provisions, know what to do until Congress gets around to passing a law that extends them and makes them applicable in 2014.

An extenders bill has now passed the House of Representatives. At first, Harry Reid in the Senate indicated the Senate might not get to the bill, but it now looks like the Senate will have a straight up-or-down vote on the bill (so that it will not be changed in the Senate). There were prior moves afoot to make at least some of the extenders permanent, but the political environment in Washington has made that a non-starter.

So it looks like we will have extension law (for 2014 only), assuming the Senate approves the House bill and the President does not veto it. Here is a list of some of the key provisions that I thought worthwhile to mention (not exhaustive):

Individual Provisions

  • exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income
  • deduction for mortgage insurance premiums treated as qualified interest
  • deduction for state and local sales taxes
  • above-the-line deduction for qualified tuition and related expenses

Business Provisions

  • research and experimentation credit
  • new markets tax credit
  • work opportunity tax credit
  • 15-year straight line cost recovery for qualified leasehold property, qualified restaurant property, and qualified retail improvements
  • increase in expensing limit and in investment based phaseout amount and expanded definition of Section 179 property for certain real property
  • RIC qualified investment entity treatment under FIRPTA
  • exceptions under Subpart F for active financing income
  • look-through treatment of payments between controlled foreign corporations
  • special 100% gain exclusion for qualified small business stock
  • reduction in S corporation recognition period for built-in gains tax

Charitable Provisions

  • basis adjustment to stock of S corporations making charitable contributions of property
  • special rules for contributions of capital gain real property for conservation purposes
  • tax-free distributions for charitable purposes from individual retirement account (IRA) accounts of taxpayers age 70 1/2 or older
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