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2014 Tax Increase Prevention Act - Key Individual and Business Tax Breaks

December 22, 2014

Corey C. Veneziano, CPA, MSAT
Tax Manager

Congress has passed the 2014 Tax Increase Prevention Act (2014 TIPA), and the president has now signed the act into law. The 2014 TIPA extends a variety of individual and business tax provisions that had previously expired in 2014. The one-year extension is not permanent and will likely be debated towards the end of 2015. The largest and most publicized provisions of the 2014 TIPA on the business side are the restoration of the Research & Development Credit, 50% bonus depreciation and increased Section 179 expensing, as well as the restoration of certain deductions on the individual side. Below is an expanded list of the major tax provisions associated with the 2014 TIPA. Please contact our office to further discuss any of the provisions of this act.

Individual Extenders

The following provisions which affect individual taxpayers are extended through 2014:

  • The $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment and supplementary material used by the educator in the classroom
  • The exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income
  • Parity for the exclusions for employer-provided mass transit and parking benefits
  • The deduction for mortgage insurance premiums deductible as qualified residence interest
  • The option to take an itemized deduction for state and local general sales taxes instead of the itemized deduction permitted for state and local income taxes
  • The above-the-line deduction for qualified tuition and related expenses
  • The provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 ½ or older

Business Extenders

The following business credits and special rules are extended through 2014:

  • The research credit
  • The new markets tax credit
  • The employer wage credit for activated military reservists
  • The work opportunity tax credit
  • Three-year depreciation for racehorses
  • 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
  • 50% bonus depreciation (extended before January 1, 2016 for certain longer-lived and transportation assets)
  • The election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation
  • The enhanced charitable deduction for contributions of food inventory
  • The increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing
  • Special expensing rules for certain film and television productions
  • The deduction allowable with respect to income attributable to domestic production activities in Puerto Rico
  • The exclusion from a tax-exempt organization's unrelated business taxable income (UBTI) of interest, rent, royalties and annuities paid to it from a controlled entity
  • The exclusion of 100% of gain on certain small business stock
  • The basis adjustment to stock of S corporations making charitable contributions of property
  • The reduction in S corporation recognition period for built-in gains tax
  • Two provisions dealing with multiemployer defined benefit pension plans (automatic extension of amortization periods, shortfall funding method and endangered and critical rules) are extended through 2015

Energy-related Extenders

The following energy provisions are retroactively extended through 2014:

  • The credit for nonbusiness energy property
  • The second generation biofuel producer credit (formerly cellulosic biofuels producer tax credit)
  • The incentives for biodiesel and renewable diesel
  • The renewable electricity production credit and the election to claim the energy credit in lieu of the renewable electricity production credit
  • The credit for construction of new energy efficient homes
  • Second-generation biofuels bonus depreciation
  • The energy efficient commercial buildings deduction
  • The incentives for alternative fuel and alternative fuel mixtures
  • The alternative fuel vehicle refueling property credit

For more information please contact Corey Veneziano at cveneziano@blumshapiro.comor 860.231.6636.

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statues, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law.

 

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