by Jennifer Zimmerman, CPA

Late last night, the Senate approved H.R. 5771, also known as the Tax Increase Prevention Act, with a vote of 76-16. The bill expires on December 31, 2014, which means that the new Congress will need to address provisions related to 2015 in 2015. President Obama is expected to sign the bill into law later this week according to the White House.

This bill has been a long time coming. The process was delayed throughout the year by debate over whether to extend the provisions beyond 2014 or to make certain items such as the research tax credit, state sales tax credit and tuition tax credit permanent. As recently as late November, a tentative deal fell apart after a veto threat from the White House, which changed the tide of the conversation from looking long-term to simply extending the provisions to the end of the year. The bill is expected to cost $41.6 billion over 10 years according to the Joint Committee on Taxation (JCT).

The bill addresses three main areas:

1. Individual Tax Extenders
2. Business Tax Extenders
3. Energy Tax Extenders

The Individual Tax Extenders include the following:

  • Tax deduction for mortgage insurance premiums (PMI)
  • Deduction from gross income for qualified tuition and related expenses
  • Tax deduction for school teacher expenses
  • Tax-free distributions from individual retirement accounts (IRAs) for charitable purposes
  • Deduction for state and local sales taxes in lieu of state and local income taxes
  • Exclusion from gross income for discharged mortgage indebtedness income
  • Equalization of employer-provided commuter transit and parking benefits

The Business Tax Extenders include the following:

  • Bonus depreciation of business assets
  • Section 179 increased expensing allowance
  • Tax credit for increasing research expenditures
  • New markets tax credit
  • Work opportunity tax credit
  • Tax deduction for contributions of food inventory by taxpayers other than C corporations
  • 100% exclusion from gross income of gain from the sale of small business stock
  • Tax incentives for investment in empowerment zones

The Energy Tax Extenders include the following:

  • Tax credit for residential energy efficiency improvements
  • Tax credit for alternative fuel vehicle refueling property expenditures
  • Tax credit for energy efficient new homes and appliances
  • Tax deduction for energy efficient commercial buildings

In addition to the extenders, the bill also includes language from H.R. 647 to create a new type of tax-advantaged savings account for those with disabilities that are eligible for government benefit programs. Click here to view a complete list of extended provisions. If you have any questions about how the extenders impact your personal or business taxes, please contact us.

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