Yesterday, the Senate passed the Tax Increase Prevention Act of 2014, also known as the "tax extenders" legislation. This bill now goes to President Obama for signature.
The "tax extenders" legislation extends more than 50 expired tax provisions retroactively to the beginning of 2014. These provisions have only been extended for 2014.
Two of the most significant provisions that were extended are bonus depreciation and Section 179 expensing.
- Bonus depreciation allows for taxpayers to claim an additional first-year depreciation deduction equal to 50% of the cost of new assets placed in service prior to January 1, 2015. In order to qualify for bonus depreciation, the asset placed in service must be a new piece of tangible property.
- Section 179 allows for taxpayers to expense up to $500,000 of the cost of qualified assets with an overall investment limitation of $2 million. To qualify for Section 179 treatment the asset must be depreciable tangible property or computer software which was acquired for use in a trade or business. Assets must be placed in service prior to January 1, 2015.
Other key business provisions that have been extended include:
- The research credit has been extended.
- The Work Opportunity Credit has been extended for employees who began work for the employer before January 1, 2015.
- For corporations that converted from C to S status, the built-in gain recognition period is five years.
- For S corporations making charitable donations of appreciated property, a shareholder's basis is adjusted by the cost basis of the asset instead of the appreciated value.
- Certain excise tax credits for alternative fuels have been extended.
Key individual provisions that have been extended include:
- The deduction for state and local income taxes in lieu of deducting state income taxes.
- The above-the-line deduction for qualifying tuition and fees for post-secondary education.
- The $250 above-the-line deduction for teachers' classroom expenses.
- The exclusion from income from cancellation of mortgage debt on a principal residence up to $2 million.
- The ability to contribute required minimum distributions from IRAs, up to $100,000, directly to charitable organizations. These distributions are not taxable.
If you have any questions concerning how these and other provisions affect your tax situation, please contact your KSM advisor.