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EXPIRED TAX BENEFITS THAT MAY AFFECT YOU FOR 2014
On December 31, 2013, 53 tax provisions expired, some of which have been around for a number of years. While there has been some talk in Congress about some of these provisions being extended and/or increased to their previous benefit amounts, currently none of them have been extended. It's important to remember that these are no longer available when planning for 2014, including items such as your capital expenditure budget and cash flow due to possible increase in taxes. The listing below highlights 15 of the 53 significant provisions that have expired.
Section 179 Depreciation Expense Limitation:
The amount of depreciation expense that can be recognized for the taxable year is reduced drastically from $500,000 in 2013 to $25,000 for 2014. The phase out of this deduction is also accelerated with the investment limitation dropping from $2,000,000 to $200,000.
This benefit for additional 1st year depreciation, previously 50% in 2013 and 100% in 2012, is no longer available for assets purchased after December 31, 2013.
Credit for Research and Experimentation Expenses:
For expenses incurred prior to January 1, 2014, a credit could be claimed for up to 20% of the excess qualified research expenses over the base amount. This is currently not available for expenses incurred after January 1, 2014.
15 Year Straight Line Cost Recovery for Qualified Leasehold, Restaurant and Retail Improvements:
For these classifications of assets purchased after December 31, 2013, the 15 year class will no longer be available and if the asset does not qualify under a lesser class life, it must be depreciated over 39 years, the same as all other improvement property.
Qualified Small Business Stock Exclusion:
Section 1202, enacted in 1993, allowed for the exclusion of 50% of any gain on the sale or exchange of qualified small business stock (QSBS) held for more than 5 years. For QSBS acquired after February 7, 2009 and before September 27, 2010, the exclusion percentage for any potential gain on sale is 75%. For QSBS acquired after September 27, 2010 and before January 1, 2014 can be 100% excluded from income. Currently, for QSBS acquired after January 1, 2014 and sold/exchanged at a gain, the exclusion percentage is back to only 50%.
Reduction in S Corporation Recognition Period for Built-In Gains Tax:
Prior to 2009, any built in gains calculated when converting from a C to an S Corporation were to be recognized upon the sale of the assets over the 10 years following the first S year. For the years 2009 and 2010, the recognition period was reduced to 7 years. For the years 2011 thru 2013, the recognition period was even further reduced to 5 years and eliminated carryover amounts resulting from business income limitations. For any built in gains resulting from S elections in 2014 and beyond are back to being recognized during the original 10 year time frame as well as having to recognize any carryforward amounts.
Work Opportunity Credit:
For hiring new employees that qualify under certain target groups prior to January 1, 2014, the employer has the opportunity to take a credit of up to 40% of first year wages for employees who work at least 400 hours or 25% of first year wages for employees who worked at least 120 hours but less than 400 hours. This credit is capped at the maximum amount of $6,000 per employee for individuals hired within the majority of the targeted groups. The credit is capped at $3,000 for summer youth employees and the cap varies between $6,000 and $24,000 for employees qualifying under different veteran target groups. For employees that qualify as certified long term family assistance recipients, this credit is available on the first 2 years of wages with the percentage of the credit increasing to 50% of the 2nd year wages. The credit for this target group is capped at $10,000 for both years. This credit is currently unavailable for employees hired after 2013.
Above the Line Deduction for Qualified Tuition and Related Expenses:
The above the line deduction for qualifying tuition and other related expenses paid on behalf of yourself, your spouse or your dependent is no longer available for 2014.
Above the Line Deduction for Certain Expenses of Elementary and Secondary Teachers:
The above the line deduction for up to $250 in unreimbursed out of pocket expenses paid by qualified education professionals is also no longer available for the taxable years 2014 going forward.
Mortgage Insurance Premiums:
These premiums were previously eligible to be an itemized deduction in addition to any mortgage interest paid during the calendar year, but as of 2014, they are no longer allowed to be deducted.
Exclusion of Discharged Debt on Principal Residences:
Income amounts resulting from the forgiveness of debt related to the taxpayer's principal residence is no longer allowed to be excluded from taxable income.
State and Local Sales Tax Deduction:
This deduction was previously allowed in lieu of the state and local income tax deduction on Schedule A for taxpayers who itemized, but is not available for taxable years after 2013.
Employer Provided Commuter Expenses:
For 2013, $245 per month were allowed to be excluded for both transit benefits and parking benefits provided by an employer, but for 2014, the per month amount for transit benefits decreases to $130 per month while the per month amount for parking benefits is increased to $250 per month.
Credit for Energy Efficient Home Improvements and Property:
This credit, available for up to $500 to offset the cost of installing energy efficient home improvements, has been eliminated for 2014. For property placed in service before 2014, the credit was calculated at 10% of the cost of the improvements or expenditures.
Credit for Health Insurance Costs of Eligible Individuals:
For qualified health insurance policies purchased before January 1, 2014, an eligible individual can claim a credit for 72.5% of the amount paid by the taxpayer for coverage for themselves and qualifying family members beginning in the tax year but is currently unavailable for policies acquired after that.