Many businesses and individuals are now seriously planning for year end, specifically to address certain tax provisions slated to expire. As a follow up to the Marcum Year End Tax Planning Guide, the following article includes a summary of some of these provisions. The tax team at Marcum urges readers to consider these tips when wrapping up year-end summaries.
Many of these temporary tax provisions were previously extended as part of the American Taxpayer Relief Act. Temporary tax provisions that are regularly extended, for one to two years, are referred to as “tax extenders.” The President’s 2014 Budget identifies several expiring provisions that should be permanently extended, including the research and experimentation (R&D) tax credit, enhanced expensing for small businesses, renewable energy credits, the work opportunity tax credit (WOTC), the deduction for state and local sales taxes, the exclusion of discharge of principal residence indebtedness, and the tax deduction for energy efficient commercial buildings.
Expiring Individual Provisions
All but one of the individual provisions scheduled to expire at the end of 2013 have been extended at least once.
- Above-the-Line Deduction for Certain Expenses of Elementary and Secondary School Teachers
- Deduction for State and Local Sales Taxes
- Above-the-Line Deduction for Qualified Tuition and Related Expenses
- Premiums for Mortgage Insurance Deductible as Qualified Interest
- Parity for Exclusion for Employer-Provided Mass Transit and Parking Benefits
- Exclusion of Discharge of Principal Residence Indebtedness from Gross Income for Individuals
- Credit for Health Insurance Costs of Eligible Individuals
Expiring Business Provisions
All but one of the business provisions scheduled to expire at the end of 2013 have been extended at least once. Most of the business provisions scheduled for expiration in 2013 have been extended more than once. Long-standing provisions that are scheduled for expiration include the research tax credit, and the work opportunity tax credit.
- Tax Credit for Research and Experimentation Expenses
- Work Opportunity Tax Credit
- Indian Employment Tax Credit
- 15-Year Straight-Line Cost Recovery for Qualified Leasehold, Restaurant, and Retail Improvements
- 7-Year Recovery for Motorsport Racing Facilities
- Employer Wage Credit for Activated Military Reservists
- Special Expensing Rules for Film and Television Production
- Special Rules for Qualified Small Business Stock
- Increase in Expensing to $500,000 / $2,000,000 and Expansion of Definition of Section 179 Property
- Bonus Depreciation
- Reduction in S Corporation Recognition Period for Built-In Gains Tax
- Election to Accelerate AMT Credits in Lieu of Additional First-Year Depreciation
- Low-Income Housing Tax Credit (LIHTC)
- Three-Year Depreciation for Race Horses Two Years or Younger
Expiring Charitable Provisions
- Enhanced Charitable Deduction for Contributions of Food Inventory
- Tax-Free Distributions From Individual Retirement Accounts for Charitable Purposes
- Basis Adjustment to Stock of S Corporations Making Charitable Contributions of Property
- Special Rules for Contributions of Capital Gain Real Property for Conservation Purposes
Expiring Energy Provisions
- Production Tax Credit (PTC) or the Investment Tax Credit (ITC) in Lieu of the PTC
- Special Rule to Implement Electric Transmission Restructuring
- Credit for Construction of Energy Efficient New Homes
- Energy Efficient Commercial Building Deduction
- Mine Rescue Team Training Credit
- Election to Expense Mine-Safety Equipment
- Credit for Energy Efficient Appliances
- Credit for Nonbusiness Energy Property
- Alternative Fuel Vehicle Refueling Property
- Incentives for Alternative Fuel and Alternative Fuel Mixtures
- Incentives for Biodiesel and Renewable Diesel
- Credit for Electric Drive Motorcycles and Three-Wheeled Vehicles
Other expiring provisions include the expiration of the New Markets Tax Credit and the Tax Exempt Bond Financing for NY Liberty Zone bonds.
Taxpayers may want to consider taking advantage of these provisions while they still exist as part of any year-end tax planning. In addition, taxpayers who have been utilizing these techniques may want to prepare for the possibility that they will not be available for the year 2014, and adjust withholding or estimated tax payments for 2014 accordingly. In order for these tax provisions to be renewed, Congress would need to pass new legislation to extend these to future years. There is a cost for extending these provisions which are estimated by the Congressional Budget Office to be in excess of $900 billion. With the present sequestering, there remains uncertainty related to extensions of these expiring items.
The Tax Advisors at Marcum are available to assist you and your company in planning for the potential elimination of these provisions.