Lawmakers in Washington brought glad tidings to taxpayers this holiday season. They voted for the Tax Increase Prevention Act, and the president signed the bill. It includes a package of tax breaks for homeowners, college students, business owners and more.
So, what’s in it for you?
- If you’re a business owner, you’ll find lots to love among the so-called tax extenders. No. 1 could be the Section 179 deduction. The deduction was supposed to drop from $500,000 to $25,000 this year. The tax extenders package keeps the deduction at $500,000. It means businesses can buy big-ticket items, such as computers and equipment, put those items into service in the tax year, and deduct up to $500,000. Those who haven’t made those purchases need to get shopping. The $500,000 deduction is good only for 2014.
- If you’re a teacher, you can continue to write-off out-of-pocket expenses for school supplies. The limit is $250, but every little bit counts.
- For those paying for college, qualified tuition and fees are deductible up to $4,000, and you don’t need to itemize. There are a few caveats to this one, including income limitations.
- For homeowners, mortgage debt will be excluded from income on a principal residence of up to $2 million for taxpayers married and filing jointly. What that means is that if you sell your home for less than you owe the bank, and the bank forgives that debt, you will not have to count the forgiven debt as income. The Tax Increase Prevention Act also allows a homeowners to deduct mortgage insurance premiums.
- Taxpayers can deduct state and local general sales taxes in lieu of state and local income taxes.
There’s much more in the Tax Increase Prevention Act. This is a quick and dirty version, your tax adviser can tell you more. Here’s the rub, though, the credits and deductions apply only to the 2014 tax year. What may be available in 2015 and beyond is up to the 114th Congress, which will be in session in the new year.