The 2013 tax year is in the books (for most of us who did not file for an extension), and the 2014 tax year is in full swing. Now is the time to consider changes that have taken place and to make adjustments accordingly while you can.
Unfortunately, those changes will mean higher taxes for many people. Below are eight (8) tax breaks that have are no longer available for the 2014 tax year (unless Congress decides to resurrect them and apply them retroactively):
- Deduction for Higher Education Expenses
The deduction for qualifying tuition and related expenses that are paid by you, the taxpayer, for yourself, your spouse and your dependents are no longer available in 2014.
- Classroom Educator Expense Deduction
Teachers who use their own money to pay for classroom expenses will no longer be able to deduct them in 2014. The above-the-line deduction for out-of-pocket classroom expenses paid by qualifying education professionals (up to $250) is no longer available in 2014.
- State and Local Sales Tax Deduction
For those people who itemize deductions, the option to claim a deduction for state and local sales tax in lieu of the deduction for state and local income tax is no longer available in 2014. This will impact those whose income is not high (think retired), but who have paid high sales taxes in 2014 for whatever reason.
- Depreciation and Expense Limits
The maximum amount of depreciation that can be expensed plummets from $500,000 in 2013 to $25,000 in 2014, and the special fifty percent (50%) “bonus” first year additional depreciation deduction is no longer available. This will mean a big tax hit for small businesses that made large equipment or similar purchases in the last few years.
- Mortgage Insurance Premium Deduction
For, individuals who itemize deductions, the mortgage insurance premium deduction is no longer available in 2014. If you have reached the point in your mortgage payments where the mortgage insurance is no longer required, now is the time to contact your lender and ask for the mortgage insurance requirement to be eliminated.
- Employer-Provided Commuter Expense Income Exclusion
Commuting just got more expensive. You can no longer exclude as much of the employer paid transit benefits (transit passes) from income. The $245 monthly exclusion cap drops to $130, though the $245 monthly cap on parking benefits that can excluded from income goes up slightly to $250. That might ironically make it cheaper to drive to work than to take mass transit. Is that really what Congress wanted to encourage?
- Energy Efficient Home Improvement and Property Credit
The non-business $500 credit for costs associated with the installation of energy efficient home improvements (like, insulation, windows, etc.) and qualified residential energy property (like energy efficient water heaters, air conditioners, etc.) is no longer available in 2014.
- Income Exclusion for Discharge of Debt on a Principal Residence
This last one is a big one. We have already seen its affect in our office as we help people cope with debt and residential homes that remain “under water”. The ability to exclude debt forgiveness from income that has been allowed since 2007 will no longer be available in 2014. If your mortgage foreclosure goes through in 2014, any deficiency between the value of the property and the mortgage debt owed will be taxed to you as “income” (debt forgiveness). This change will discourage deeds in lieu of foreclosure and place a heavy tax burden on individuals who have already experienced the crush of debt and of real property that has lost significant value since 2007.
If any of these changes will affect you, now is the time to start planning. See a certified public account and/or your attorney as applicable and begin to take steps to minimize the impact these changes may have on you.Kevin G. Drendel Drendel & Jansons Law Group 111 Flinn Street Batavia, IL 60510 (630) 406-5440 firstname.lastname@example.org www.batavialaw.com