Many people assumed that Congress would reinstate the tax provisions that expired at the end of 2013, as they’ve done in the past. But here it is, December, and the extender bills are still sitting on their desks. Although it’s still possible that they could extend the deductions and make them retroactive to January 2014, time is running out. Here are the expired provisions you shouldn’t count on.
- The educator expense. Previously, teachers could get reimbursed up to $250 of money they’d spent out of their personal accounts on needed classroom supplies. But apparently Congress believes teachers get paid handsome salaries and shouldn’t need to be reimbursed anymore, because this provision wasn’t renewed.
- Mortgage debt forgiveness. Congress passed the Mortgage Forgiveness Debt Relief Act in 2007. The Act offered an exception to the rule that, for federal income tax purposes, once a lender writes off any part of your debt, the amount which is forgiven is reported to the IRS may be includable as income. This exception is now expired.
- Equalization of employer-provided commuter transit and parking benefits. In 2013, benefits for transit passes and commuter highway vehicles were the same as those for parking. But the parity provision wasn’t extended, so now the monthly limitation for vanpools (commuter highway vehicles) and transit passes is $130, while the fringe benefit exclusion amount for qualified parking is $250.
- Deduction for mortgage interest premiums. You can no longer deduct the cost of private mortgage insurance.
- Tax deduction for state and local general sales taxes in lieu of state and local income taxes. You no longer have the option of taking the deduction for state and local general sales tax.
- Tuition and fees deductions. Under old law, taxpayers could claim up to $4,000 in education expenses so long as they met certain income criteria, whether they itemized or not.
- Tax-free distributions from individual retirement plan for charitable purposes. IRA owners age 70-1/2 or older could previously exclude up to $100,000 per year from gross income if IRA funds were paid directly to certain public charities. Now, an IRA owner has to pay tax on the IRA funds when withdrawn – even if donated to a qualified charity.
- Work Opportunity Tax Credit. This credit offered employers a tax credit for hiring certain workers, such as vets. The credit no longer exists for employees hired in 2014 and beyond.
- Section 179 expense increase. Small and mid-size business owners used to have the option of immediately deducting up to $500,000 in qualifying equipment rather than hack the deduction into pieces over time according to a depreciation schedule. Now, the limit is $25,000.
- Tax credit for residential energy efficiency improvements. The credit of up to $500 for the installation of qualified insulation, windows, doors and roofs as well as certain water heaters and qualified heating and air conditioning systems is gone.
If Congress does finally act, the tax season would be delayed. This, combined with the cost of extending the deductions, means that Congress isn’t making them a priority. I’ll keep you updated if anything changes.