For individual taxpayers
- Tax deduction of state and local sales tax in lieu of state and local income tax – Taxpayers who itemize their deductions may elect to deduct state and local general sales taxes paid, rather than state and local income taxes.
- Tax exemption of distributions from Individual Retirement Accounts (IRA) for charitable purposes – Taxpayers age 70½ or older may exclude up to $100,000 from gross income if the IRA distributions were paid directly to qualified charities.
- Tax deduction of contributions of real property interests for conservation purposes – Taxpayers may deduct a charitable contribution for the value of a qualified real property interest donated to a qualified organization.
- Tax deduction of qualified tuition and related expenses – Taxpayers meeting certain income criteria may deduct up to $4,000 in education expenses.
- Tax deduction for premiums paid on mortgage insurance obtained in connection with acquisition indebtedness on a qualified residence.
- A tax credit of up to $500 for residential energy efficiency improvements; a tax credit of $1,000 or $2,000 for building a qualified new energy-efficient home.
- Home debt forgiveness exclusion – Taxpayers are allowed to exclude from income cancellation of mortgage debt on a principal residence of up to $2 million.
- 100% gain exclusion on sale or exchange of qualified small business stock held for at least five years.
- Under the TIPA, the Achieving a Better Life Experience Act (ABLE) was created to provide tax-favored savings accounts for individuals with disabilities.
For business taxpayers
- Dollar-for-dollar Research Tax credit for costs incurred in association with developing, designing, or improving a product, process, formula, technique, invention, or software.
- Employers may claim up to $6,000 of Work Opportunity Tax Credit per qualified employee hired, including veterans.
- New Market Tax Credit provides taxpayers with 7 years of Federal tax credits for investing in businesses located in qualified low-income communities.
- The $500,000 Section 179 deduction with a $2 million beginning phase-out amount for acquisition of qualified property through the end of 2014, as well as the unlimited 50% first-year bonus depreciation on qualified new equipment acquired, were both extended under the TIPA. Note that the deduction is $250,000 for qualified leasehold improvement, restaurant, and retail improvement property and for these acquisitions, accelerated depreciation is allowed.
- Businesses making donations of food inventories may claim the enhanced deduction under TIPA.
- For S Corporation elections made in 2014, the tax period for built-in gains is shortened from ten years to five years. C corporation owners should definitely consider making an S election to take advantage of this provision and should be discussed with us.
In addition to the above discussed, many tax breaks with more limited applicability have also been extended under the TIPA; it is possible that some of them could also benefit you or your business. This list is not complete but contains the most common provisions and those that affect the most taxpayers. Please contact us for detailed analysis if you have any questions regarding the TIPA or how its various provisions may impact you and your business.