Most taxpayers remember the relief act that was passed in January 2013 in an attempt to avoid major tax increases for the middle-class. This act, known as the American Taxpayer Relief Act, did permanently address some issues that taxpayers have been concerned with for some time. For example, the provisions for the marriage penalty relief and the exclusion for employer provided educational assistance were made permanent. In addition, the Alternative Minimum Tax (AMT) exemption was finally indexed for inflation, permanently!
Most of the provisions included in the Relief Act only temporarily extended certain tax benefits. Some of these provisions that business owners and individual taxpayers have grown to depend on, are scheduled to expire at the end of 2013. While many are hoping and expecting that Congress will provide additional extensions of these provisions, we are not expecting to see any changes in 2013. Therefore, taxpayers should take note of the provisions that are set to expire in a few weeks and plan accordingly. Below are a few examples of provisions that are expiring this year. For a complete list of tax provisions and the date they are set to expire, click on the link below.
Residential energy credit
Vehicle related energy credits
Deduction for mortgage insurance premiums
Tuition deduction
The exclusion of cancellation of debt income for home mortgage
Educators Expense deduction
Increased expensing under Section 179 reverts back to the $25,000 limit
50% Bonus Depreciation
Built-in gains tax provisions for S Corporations
Domestic Production Activities Deduction
Business energy credits
Taxpayers also want to consider any major life changes in the past year that may have a significant tax impact on their 2013 tax liability. Has your income increased significantly so that you are now affected by the additional Medicare tax? Did you start a business in 2013? Did you retire from your job this year? Has your marital status changed? Did you have a child? Have your dependents decreased in 2013? Did you take early distributions from a retirement account or did you purchase investment or rental real estate? These are a few examples of events in your life that should encourage you to contact your tax preparer to help you determine the tax impact of these changes. In addition, they can provide you with guidance on potential steps you can take before the end of the tax year to reduce your tax liability. If you are interested in consulting with our tax advisors about these or any other tax issues, please contact our office.
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