Congress has been busy this month, passing a string of important tax packages that could have an impact on some of our clients. So, we wanted to take a brief minute to summarize and share the actions and impacts of this legislation.
First, Congress passed the Tax Increase Prevention Act of 2014 (HR 5771), which extended “tax extenders” retroactively for one year (through 2014). This one-year retroactive extension allows individual taxpayers to take advantage of temporary incentives on their 2014 returns, such as state and local sales tax deductions,higher education tuition deductions, and deductions for the exclusion for discharge of mortgage debt. In addition, the Tax Increase Prevention Act of 2014 allows for business and energy incentives such as the research tax credit, bonus depreciation credit and the production tax credit. Although none of these extensions have been made permanent, their one-year extension does add up to some significant potential tax savings for both individuals and businesses. In fact, the Joint Committee on taxation estimates the following:
- Research Tax Credit $7.629 billion
- Mortgage Debt Forgiveness $3.143 billion
- State And Local Sales Tax Deduction $3.142 billion
- 15-Year Recovery Leasehold/Retail Improvement, Restaurant Property $2.382 billion
- Work Opportunity Tax Credit $1.375 billion
- Incentives For Biodiesel And Renewable Diesel $1.297 billion
- Code Sec. 25C Residential Energy Credit $832 million
- Tuition And Fees Deduction $300 million
Second, Congress passed the Achieving a Better Life Experience (ABLE) Act, which created tax-favored savings accounts for individuals with disabilities for tax years beginning after December 31, 2014. This legislation authorizes states to create an ABLE Program in which disabled individuals could utilize a tax free savings account that could be used for qualified medical, education, transportation and housing expenses. As with any such program (e.g. 529) distributions used for nonqualified expenses would incur income tax liabilities plus a 10% penalty. Under the law, individuals with disabilities are limited to one ABLE account with total contributions by all individuals to any single ABLE account to not exceed the gift tax exclusion amount (which for 2015 is $14,000). Utilizing proven concepts, this tax vehicle should provide much needed fiscal tax relief for individual with disabilities.
Finally, Congress recently passed a complete $1.1 trillion spending package for Fiscal Year 2015. This budget is expected to be signed by President Obama and confirmed as of the time of this article, and will keep the federal government fully funded for another year.
If you have a question about any of these new mandates or need assistance understanding and adhering to any accounting and/or tax law statutes, contact Lescault and Walderman at 866-496-2042.