Although the American Taxpayer Relief Act (enacted in January of this year) added or extended several key tax provisions and rates, dozens of tax provisions are set to expire at the end of 2013 (though most relate to businesses, if you have a pass through entity you could feel the affect). Here is a list of a few of them (along with brief commentary):
· Deduction for state and local sales taxes in lieu of state and local income tax (in years where you make large purchases subject to sales tax you will no longer be able to take advantage of those tax payments)
· Deduction for certain elementary and secondary school teacher expenses (a $250 above the line deduction)
· Premiums for mortgage insurance deductible as qualified residence interest
· Deduction for qualified tuition and related expenses (an above the line deduction)
· Tax free distributions from IRAs for charitable purposes
· Credit for health insurance costs of eligible individuals
· Research and Development credit
· 50% Bonus depreciation (where the original use began with your purchase)
· The $500,000 expensing limit and $2,000,000 phase-out threshold and expended definition of Sec. 179 property (in 2014 this will be $25,000 – the same rate as California currently)
· Fifteen-year straight-line cost recovery for certain improvements (Going back to 39 years!)
· Reduced S corporation recognition period for built-in gains tax (if you convert to S from C status, you will now have to wait 10 years in 2014 instead of the current five years to exclude the gain from taxation at the corporate level – if you have not already converted to S status for 2013, it may already be too late to correct this)
· There are other expiring provisions beyond the scope of this article. As the year draws to a close, give us a call if you are concerned about how you will be affected by these changes in the law.
At Beck CPA we offer a free ½ hour consultation.
Gregory W. Beck
Certified Public Accountant