Daniel W. Polachek, P.C. CPA, EA, MBA, CVA, CFP®
11 Expiring Tax Deductions For 2013
By Harry Plack - September 30, Small Business Magazine
Quite a few tax deductions will expire this year; here is a brief round-up of some of the deductions you may want to take advantage of before they expire. Unless otherwise noted, all deductions expire on .
1. Cancellation of Debt Exclusion: Currently, individuals can exclude up to $2 million of COD income from qualified principal residence indebtedness that is canceled because of their financial condition or decline in value of the residence.
2. Mortgage Insurance Premiums Deduction: Individuals with an AGI less than or equal to $109,000 can treat qualified mortgage insurance premiums as home mortgage interest.
3. Personal Energy Property Credit: A credit is available for qualified energy efficiency improvements and expenditures to a taxpayer’s principal residence, with a lifetime cap of $500.
4. State and Local Sales Taxes Deduction: 2013 is the last year individuals can elect to deduct state and local general sales taxes instead of state and local income taxes.
5. Tuition and Fees Deduction: Individuals can claim an above-the-line deduction for tuition and fees for qualified higher education expenses.
6. Qualified Charitable Distributions: Taxpayers over age 70-1/2 can make tax-free transfers from an IRA directly to a charity. Any amounts so transferred count toward the individual’s required minimum distribution, but are not deductible as charitable contributions. Income exclusion expires December 31, 2013.
7. Qualified Leasehold, Restaurant and Retail Improvement Property: Qualified leasehold improvements, qualified restaurant property and qualified retail improvements are assigned a 15-year (straight-line) recovery period. Beginning in 2014, all improvements will be written off over a 39 year period.
8. Section 179 — Deduction Limit: The Section 179 deduction and qualifying property limits are $500,000 and $2,000,000, respectively. In addition, off-the shelf computer software qualifies for Section 179 expensing and taxpayers can amend or irrevocably revoke a Section 179 election. After 2013, the deduction and qualifying property limits are $25,000 and $200,000, respectively. Off-the-shelf software does not qualify for Section 179 expensing and the election generally is irrevocable with IRS consent.
9. Section 179—Qualified Real Property: Taxpayers can claim the Section 179 deduction on up to $250,000 of qualified real property (qualified leasehold improvements, qualified restaurant property and qualified retail improvement property). In 2014, qualified real property is not eligible for Section 179 expensing.
10. Special (Bonus) Depreciation: 50% special depreciation is allowed for qualified property additions placed in service in 2013. (Note: For 2013, the Section 280F limit on depreciation for passenger autos is also increased by $8,000 for qualified property and no AMT adjustment applies to property for which the special depreciation allowance is claimed.) In 2014, special depreciation is only available for long production-period property and certain aircraft.
11. Qualified Small Business Stock Gain Exclusion: QSBS acquired Sept. 28, 2010–Dec. 31, 2013 qualifies for 100% gain exclusion (if the holding period is met). For stock acquired during that period, the following rules also apply: 1. None of the 60% gain exclusion rules for QSBS issued by a QBE apply. 2. No portion of the excluded gain is added back to determine alternative minimum taxable income. For 2014, gains on QSBS acquired after Dec. 31, 2013, qualify for a 50% gain exclusion [60% for QSBS issued by a qualified business entity (QBE)] and a percentage of the excluded gain is an AMT preference item