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An Early Holiday Gift? 'Extended' Tax Breaks Head To Obama's Desk

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An Early Holiday Gift? 'Extended' Tax Breaks Head To Obama's Desk

The bill H.R. 5771 has yet to receive President Obama's signature, but the news of extended tax breaks for 2014 is cause for a sigh of celebration and lots of preparation.

Congress on Tuesday voted to extend a handful of tax breaks that have met their expiration date through the end of 2014. While businesses are the predominant group affected by the bill, a few renewed extensions will directly pertain to individual filers.

Related Link: 3 Retirement Tips To Consider In The 'Era Of Personal Responsibility'

8 Tax Breaks In The Bill

1. Achieving A Better Life Experience (ABLE) Act. This portion of the bill is not an extension of an expired break, but rather an act that provides tax-free savings accounts for those with early/young-adulthood onset disabilities.

2. Tax-Free IRA Charity Distribution. For those aged 70.5 or older, up to $100,000 from traditional IRAs can be withdrawn sans tax penalties and given to eligible charity organization(s).

3. Itemized Mortgage Insurance Premiums Deduction. For those who had to take out mortgage insurance, the premiums may be deducted.

4. Forgiven Mortgage Debt Exclusions. While forgiven debt is regularly treated as taxable income, this tax break will allow excluding forgiven mortgage debt.

5. Commuter Cost Deductions. For those who commute to work, $250 per month can be reduced from pre-tax income.

6. Educators' Expenses Deducted. For those educators who spend their own money on classroom items, this extension would grant a $250 deduction.

7. College, Graduate School Tuition Deduction. Available for the individual, spouse or dependents, this deduction can amount up to $4,000 from educational expenses. There are very specific limitations, however, to this deduction, including income-based limitations, additional education tax breaks and scholarships or grants.

8. State And Local Sales Taxes Deducted For Itemizers. For those who itemize their taxes (and live in a state with state income tax), this portion of the bill will grant reprieve for state and local tax amounts paid.

2 Things To Be Aware Of:

While at the surface the bill appears to be a positive, it has been met with mixed reactions. Heralded as a last minute cop-out, the bill — while retroactive for the entirety of 2014 — only delays tax uncertainty for a few weeks. Politico's Kelsey Snell reported it as "a two week tax bill that nobody really wanted" and "the minimum lawmakers could do." Senator Orrin Hatch (R-Utah) commented, "Never in the history of tax legislation have so many voted for so little and been so disappointed." Senator Ron Wyden (D-Oregon) said that the bill "doesn't have the shelf life of a carton of eggs."

Additionally, the bill may affect early filers.

In light of the late-in-the-year bill, early tax filers should be cognizant of how the bill unfolds over the next few weeks. Mid-January is the typical start for early filing, but the IRS may be forced to delay this start, says CNN Money.

Regardless of whether the extensions affect an individual, the delay in early filing would be a blanket delay.

Image credit: Chris Potter, Flickr

Posted-In: Congress Kelsey Snell Orrin HatchPolitics Top Stories Economics Personal Finance General Best of Benzinga

 

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