2014 Tax Extender Bill Signed by Obama

By Yigang Xu, CPA
Greenville, SC

December 19, 2014
Congress has been for several years now, passing a last minute tax extender bill to retroactively extend many expiring tax provisions. This year, the bill H.R. 5771, also known as the Tax Increase Prevention Act of 2014 is finally passed and signed by President Obama into law December 19, 2014.

Here is a very brief summary of many of the tax provisions (both for individual and business) extended through December 31, 2014. There was an earlier proposal to permanently extend some provisions or to extend these following provisions till the end of 2015, but these were not adopted in the final bill.
Extended Individual Provisions:
•The Sec. 62 deduction for certain expenses of elementary and secondary school teachers;
•The Sec. 108 exclusion from gross income of discharge of qualified principal residence indebtedness;

•The Sec. 132 provision providing parity between employer-provided mass transit and parking benefits;

•The Sec. 163 treatment of mortgage insurance premiums as qualified residence interest;

•The Sec. 164 deduction for state and local general sales taxes;

•The Sec. 170 special rule for contributions of capital gain real property made for conservation purposes;

•The Sec. 222 above-the-line deduction for qualified tuition and related expenses; and

•The Sec. 408 provision allowing tax-free distributions from individual retirement plans for charitable purposes.

Extended Business Provisions (partial):
•The Sec. 41 R&D credit;

•The Sec. 45P employer wage credit for employees who are active duty members of the uniformed services;

•The Sec. 51 work opportunity tax credit;

•The Sec. 168 provision classifying certain race horses as three-year property;

•The Sec. 168 provision allowing 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements; (a huge tax incentives)

•Sec. 168 bonus first-year depreciation (for certain property with longer production periods, the property must be placed in service before Jan. 1, 2016);  (another huge tax incentives)

•The Sec. 168 election to accelerate the alternative minimum tax credit in lieu of bonus depreciation (and special rules were added for round 4 extension property);

•The Sec. 170 enhanced charitable deduction for contributions of food inventory;

•The increased expensing limitations and treatment of certain real property as Sec. 179 property;

•The Sec. 179E election to expense mine safety equipment;

•The Sec. 1202 exclusion of 100% of gain on certain small business stock;

•The Sec. 1367 allowance for basis adjustments to stock of S corporations making charitable contributions of property;

•The Sec. 1374 reduction in S corporation recognition period for built-in gains tax; (although not very common any more, but can be a very big tax incentive)

Energy tax incentives Various energy tax provisions (partial):
•The Sec. 25C credit for nonbusiness energy property;

•The Sec. 45 credits with respect to facilities producing energy from certain renewable resources;

•The Sec. 45L credit for energy-efficient new homes;

•The Sec. 179D deduction for energy-efficient commercial buildings;

This bill extended to the end of 2014 many tax provisions favorable to individual and business taxpayer, at the same time penalties for failure to file individual, partnership S corporation return and information return, and penalty for incorrectly filling 1096 and 1099 has been increased to offset the lost in revenue.

Thanks for reading.


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