The Tax Increase Prevention Act of 2014 (TIPA), which Congress passed on December 16, 2014, restores certain deductions and credits that were not going to be available in 2014. Here are four of the most common deductions:
1. The Qualified Tuition Deduction
If you paid education expenses last year, you have the option of getting a credit or a deduction for expenses incurred to pay tuition and fees.You may be able to write off as much as $4,000.
2. Principal Residence Loan Forgiveness
When a debt is cancelled, you have to pick it up as taxable income, unless you meet certain criteria. It’s kind of a double whammy for you, when in dire straits, that you qualify to have a loan forgiven, but may have a tax bill relating to the cancellation. How harsh is that?From the Mortgage Debt Relief Act of 2007, there’s been a tax-free treatment for forgiven principal residence debt, that was to end in 2013. This act is now restored for 2014. So if you had a foreclosure or short sale in 2014, the remaining qualified balance of your loan that was forgiven is now considered tax-free.
3. State and Local Sales Taxes
State and local sales taxes are still deductible for taxpayers through 2014. For example: Floridians, who have no income tax, are able to still utilize their sales tax deduction, which was supposed to end in 2013.
4. School-Related Expenses for Teachers
Teachers have been eligible to deduct up to $250 of school-related expenses paid out of their own pockets, whether they are itemized or not. This was set to expire in 2013, but has been reinstated as well.
So if you’ve learned anything this tax season, it’s this:
Never throw away a receipt for something you think is no longer deductible, because you never know what will pass at the eleventh hour. Expired deductions and credits may all of a sudden become available to you again, so ensure that you have proof of your deductions.
Depending on your eligibility for certain deductions, time may be running out for you to take advantage of the TIPA this tax season. Please contact me, Susan Moussi, CPA, CFP®, CDFA, to learn more.
Susan A. Moussi, CPA, CFP®, CDFA SMD Tax & Divorce Financial Planning Consultants, Inc. Phone: 614.429.4172 firstname.lastname@example.org