It’s finally official—President Barack Obama signed H.R. 5771, The Tax Increase Prevention Act today. While businesses are celebrating the one-year extension of the research and development credit and bonus depreciation, individual taxpayers have cause to celebrate too. That’s because the list of 50-plus tax extenders means money in your pocket come tax day next April.
There’s tax relief for teachers, commuters, home renovators who go green, and folks who live in no-income-tax states. They’ll all see the breaks on their 2014 tax returns—the filing season is just around the corner. The one-year extension of the laws, which expired on December 31, 2013, is good through December 31, 2014. That spells uncertainty come January 1 (good luck estimating your 2015 taxes).
If you run through the list, chances are you'll find a tax break that applies to you. (Credit: Getty... [+]
These are the major individual tax extenders—now good law only through Dec. 31, 2014 (it bears repeating):
- The deduction for state and local sales taxes. The option to deduct state and local sales taxes instead of deducting state and local income taxes is is huge for those who live in no-income tax states like Florida and Texas.
- Above-the-line deduction of up to $4,000 for higher education expenses. This helps college students or their parents.
- A $250 above-the-line deduction for school teachers for supplies.
- Parity for employer-provided mass transit and parking benefits ($250 a month, up from $130 a month). Transit commuters who run all their commuting costs through their employer’s transit plan should get a retroactive true up—a potential $576 extra tax savings for 2014. For details on the math, see Commuter Tax Break Set To Plummet For 2014.
- The ability to exclude up to $2 million in discharge of residential mortgage indebtedness from gross income. Normally taxpayers have to pay income taxes on forgiven debt.
- The deduction for mortgage insurance premiums.
- Energy-efficient home improvements tax credit. This one is listed under “energy” extenders but it affects homeowner’s personal tax return. You can get a tax credit (that’s a dollar for dollar reduction in your tax liability) of up to $500 for making energy-efficient home improvement like new windows or upgraded heating/a-c equipment. The Alliance to Save Energy has an explainer of what counts here.
- Tax-free distributions from an Individual Retirement Account for charitable purposes (the IRA charitable tax rollover) for taxpayers over 70 ½. See Dreaming Of A Charitable IRA Rollover for more details on how this works.
- Enhancements to the rules for donating real property for conservation that encourage farmers, ranchers and other modest-income landowners to increase the pace of land conservation. For how the enhanced breaks work, see Good And Bad News For Conservationists In New Law.
