As is the case in most recent years, there are a slew of tax breaks that are set to expire at the end of the year. The big difference with this year in comparison to previous ones is that the Alternative Minimum Tax patch is no longer an issue. It was permanently addressed and “fixed” this year. What tax breaks should businesses and individuals be prepared to lose after the end of the year?
Business tax breaks set to expire
The expanded Section 179 provision is scheduled to revert back to $25,000 from its current maximum amount of $500,000. Last year, this same provision was set to expire, but Congress stepped in to extend it one more year. Of all of the business tax breaks that will be reduced or cease to exist, this is likely to have the greatest negative impact on businesses. It’s certainly possible that Congress will extend this tax break again in 2014, but there’s less likelihood of an extension as in past years. Businesses that are considering a capital investment that qualifies for the Section 179 provision, should seriously consider doing it this year. Other factors also need to be considered such as the business’s ability to make such an investment and their projected income growth over the next few years. The other major related tax break to keep note of is the status of the 15 year straight line cost recovery deduction for qualified leasehold, restaurant and retail improvements.
The research and experimentation credit is also slated to expire at the end of the year. This should be of most interest to businesses that invest in R&D.
What about tax breaks impacting individuals?
The state and local sales tax itemized deduction is step to expire which can be significant for those taxpayers that planned to make significant purchases in 2014 (IRC Sec. 164(b)(5)). In addition, those earning less than $100,000 that are able to deduct their mortgage insurance premiums in 2013 will not be able to do the same next year (IRC Sec. 163(h)(3)). This will be particularly hurtful to low income families that have difficulty affording homes and insurance. Then, there are also some education relation tax breaks that will expire such as the above the line tuition and fees deduction.
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