New Legislation Could Benefit You

Highlights of the Tax Increase Prevention Act of 2014. By Pat Adams, Padgett Business Services. Photo by Jake Haust.

The Tax Increase Prevention Act of 2014 (TIPA) was signed by President Obama on December 19, 2014, extending for one year over 50 expiring tax provisions relating to individuals and businesses.

Extended individual provisions include:

• Above the line deduction for up to $250 of educator expenses for books, classroom supplies and computer equipment for eligible elementary and secondary school teachers.

• Above the line deduction for eligible individuals for higher education expenses including tuition and fees, up to $4,000.

• Election to deduct state and local general sales tax as an itemized deduction instead of state and local income taxes.

• Itemized deduction for mortgage insurance premiums paid or accrued in connection with the acquisition of a qualified residence.

• Qualified principal residence indebtedness exclusion for debt discharge income up to $2 million for married filing jointly and $1 million for married filing separately.

• Tax-free charitable donation up to $100,000 from an IRA for taxpayers 70½ or older.

• Monthly exclusion for employer provided transit/vanpool benefits up to $250, making it the same amount as employer-provided parking.

Extended business provisions include:

• Increased dollar limit to $500,000 for §179 expensing, subject to a gradual reduction once capital expenditures exceed $2 million. • $250,000 qualified real property §179 expense limit.

• 15-year straight line cost recovery period for qualified leasehold improvements, qualified restaurant property and qualified retail improvements.

• 50% bonus depreciation for property acquired and placed into service in 2014.

• First-year depreciation cap for autos and trucks increased by $8,000 for property that qualifies for bonus depreciation.

• The following credits have been retroactively extended: Research Credit, Work Opportunity Tax Credit, Indian Employment Credit, New Markets Tax Credit and Differential Wage Payment Credit.

• Enhanced charitable deduction for business owners for contributions of wholesome food inventory.

• Empowerment Zone Tax Incentives for businesses and individuals residing in an eligible zone.

• The S-Corp recognition period for built -in-gains tax is five years.

• 100% gain exclusion on the disposition of qualified small business stock.

• Paying attention to new tax changes is good practice for any individual or business. As always, it’s best to discuss any new legislation with your tax professional.

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