Many of the tax laws that taxpayers rely on for deductions and credits year after year are known as “extenders”. Extenders are enacted to expire within one or two years. Typically, at the end of that period, Congress temporarily extends those provisions. This year, however, dozens of extenders have been allowed to expire. Unless they are retroactively extended, taxpayers will not be able to rely on them in 2014. These include:
- Bonus depreciation provisions;
- Tax-free charitable IRA distributions;
- Energy efficiency credits;
- Deductions for state and local sales taxes;
- Deductions for mortgage insurance premiums deductible as qualified interest; and
- Above-the-line deductions for qualified tuition and related expenses.
A number of competing bills have been introduced in Congress to address the fate of these extenders. Some proposals include addressing extenders in an attempt to broadly reform the tax system. Others involve a “no-questions-asked” extension of these lapsed extenders for another year. Until a solution is found, tax planning in 2014 is likely to involve some degree of uncertainty. Taxpayers should consult with a tax advisor as to which expired extenders might apply to them and planning alternatives to address when and if these extenders will be brought back.
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