The tax code contains many provisions that are considered temporary and will expire after a set period of time. The end of 2013 is no exception. Listed below are some of the individual provisions that are currently set to expire at the end of 2013:
Deduction for state and local sales taxes
These expiring provisions will not affect everyone. For example the state and local sales taxes will have the greatest effect on people living in states that do not have state income taxes. Although Missouri does have a state income tax, people planning on major purchases should consider the timing of those purchases in the event sales tax could exceed real estate taxes for the year.
Above the line deduction for certain expenses of teachers
This is an above the line deduction of up to $250. The deduction for teacher expenses will only affect teachers (although teachers may want to stock up for 2014 in 2013).
Deduction for mortgage insurance premiums deductible as qualified interest
The deduction for mortgage insurance premiums will likely have a more broad effect. Anyone who uses itemized deductions and has a home mortgage with mortgage insurance will pay more tax in 2014 due to the loss of this deduction.
Exclusion of debt forgiven of principal residence debt from gross income
Excluding gross income from principal residence debt forgiven will affect people who have their lender reduce the debt on their home. Hopefully with the improvements in the economy this will have little effect.
Tax free distribution from IRAs for charitable purposes
The tax free distribution from IRAs allowed people who did not need their required minimum distribution (RMD) to live on to send it to a charity. This counted as their RMD without increasing their income. The section of the population most affected by this are retired individuals who must take RMDs.
The real question is whether or not congress will act to extend some of these provisions. If congress does act, will it be before or after the end of 2013?
We are dedicated to staying up to date with tax changes. If you have any questions about tax planning, don’t hesitate to contact us. We are always available to assist you with any of your tax planning needs.
written by Jay Logal, CPA, Manager