Remember the Fiscal Cliff from a year ago or so? It’s hard to remember how we thought it was the end of the world if Congress didn’t work a plan for the expiring Tax Cuts. Now, we’ve got a government shutdown and a looming debt ceiling along with forecasts of another 2008-style financial collapse.
But we can’t forget those tax breaks. That’s because some of them only had a temporary fix. We have a whole group of tax breaks set to expire at 12-31-13. If Congress does nothing about it, they are gone after this year.
Here’s a list of what is expiring after the end of the year:
Educator’s expenses. Teachers, instructors, counselors, principals and aides for kindergarten through 12th grade can deduct up to $250 out-of-pocket costs. This expires at the end of the year.
Cancellation of debt-mortgage debt forgiveness. If you lose your house to foreclosure or deed-in-lieu of foreclosure or through a short sale, you’ll have cancellation of debt income (COD). COD is normally taxable, except for the Mortgage Forgiveness Debt Relief Act of 2007. However, that exclusion is going away at the end of the year. That means the COD income would be taxable.
Mortgage insurance premiums deduction. Taxpayers with adjusted gross income of $109,000 or less can currently treat qualified mortgage insurance premiums as home mortgage interest.
Personal energy property credit. A credit subject to a $500 lifetime cap is available for qualified energy efficiency improvements and expenditures to a taxpayer’s principle residence until the last day of this year.
State and local sales taxes deduction. Many taxpayers who do not pay state income taxes can take instead the state and local sales tax deduction, but only through 2013.
Tuition and fees deduction. Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.
Small business owners and real estate investors, take note of the following:
Qualified leasehold, restaurant and retail improvement property depreciation changes. Depreciation for the above items is currently calculated over a life of 15 years. After 2013, they go to 39 year life.
Section 179 deduction limit. Currently, the Section 179 deduction and qualifying property limits are $500,000 and $2 million respectively. After 2013, the deduction for Section 179 expensing will be $25,000 and $200,000 respectively.
Special (bonus) depreciation. Certain personal property is currently allowed a 50% special depreciation. That goes away after Dec 31.
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