Tax Increase Prevention Act of 2014

By Greg Yoder, CPA

The Senate has passed the Tax Increase Prevention Act of 2014, and it appears likely that the President will sign the legislation. The Act retroactively extends a large number of provisions that expired at the end of 2013 (and that now expire at the end of 2014).

A few of the highlights:

For individuals:

  • Taxpayers may deduct state and local sales taxes in lieu of state income taxes. This primarily benefits people who live in a state without a state income tax.
  • Mortgage insurance premiums will continue to qualify as qualified residence interest (subject to an income-related phaseout)
  • Individuals who are 70 1/2 or older can exclude from income IRA distributions made to a charitable organization
  • Energy credits — including certain residential credits — have been extended through 2014

For businesses:

  • 50% bonus depreciation is available for assets placed in service through 12/31/14
  • Property eligible for bonus depreciation includes certain types of real property, such as qualified leasehold improvement property, which also have a shorter 15-year depreciation period, provided the property is placed in service by 12/31/14
  • The limit for ยง179 expensing of business assets will remain at $500,000 (subject to various limitations) for tax years beginning in 2014
  • Numerous credits that had expired are now available for 2014. These include the research credit and various targeted employment credits
  • Businesses that donate food inventory can take a deduction that is somewhat greater than their basis in the inventory
  • The built-in gains recognition period for S corporations is reduced from ten years to five years

The list of extended provisions is quite long, and many provisions apply to a limited number of taxpayers or industries. As in the past, there are complex limits and requirements associated with each of the provisions, and we are eager to help you understand and take advantage of any law — new, extended, or otherwise — that can limit your overall tax exposure.