The much-awaited Tax Increase Prevention Act (H.R. 5771) was finally signed by President Barack Obama. More than 50 tax breaks that expired in 2013 were extended temporarily. Taxpayers use breaks such as the Educator Expense Deduction, and Mortgage Debt Relief for 2014 to lower their tax liability for the year.
These tax breaks expired in 2013 and were not extended until a few days ago. That gives very little time for taxpayers to take advantage of these extended tax breaks. Moreover, many of the deductions are extended only for 2014 and may or may not be available in 2015.
The major tax deductions that have been extended until Dec 31, 2014 are:
Educator Expense Deduction – Schoolteachers get a $250 above-the-line deduction for expenses made on buying supplies for the classroom.
Energy-Efficient Home Improvements Tax Credit – You can get a tax credit of up to $500 for upgrading your home to make it more energy efficient. You get a dollar for dollar reduction in your tax bill by using this credit.
Mortgage Debt Relief – Under this tax break, $2 million of forgiven debt on your principal residence can be excluded from your gross income. Without this tax break, taxpayers would have to pay income tax on forgiven debt.
Mortgage Insurance Premiums – You can deduct the amount you paid for mortgage insurance if you were required to purchase this when you bought your new home.
State and Local Sales Taxes – If you live in a state where there is no state income tax, then you can choose to deduct state and local sales tax or deduct state and local income tax. If you made large purchases, you can use state and local sales tax to reduce your tax bill.
Charitable Distributions – If you are at least 70-1/2 years of age, take out funds from your IRA and directly transfer them to a qualified charity, then you can save much in taxes. You can use this deduction if you don’t have other major deductions to claim.