Tax Extension Bill Passed and The Health Insurance Guru

ornament on a christmas tree that says merry christmas

Photo provided by flickr.com

Christmas Surprise from the IRS

This week Congress gave us all a Christmas gift. The Senate finally passed the tax extender bill but only for 2014. Yes, it is retroactive to January 1, 2014 and it means it expires December 31, 2014 in two weeks. The bill now goes to President Obama, who is expected to sign it into law this week. Although it is a pretty last minute change, it is good news for your 2014 tax returns.

The bill includes:

  • Above the line educator expense deduction
  • Tuition and fees deduction
  • Mortgage debt forgiveness
  • Equalization of employer-provided commuter transit and parking benefits
  • Deduction for mortgage interest premiums
  • Deduction for state and local sales tax deduction
  • Up to $100,000 distribution from IRA to charity
  • Work opportunity tax credit
  • Increased Sec 179 deduction
  • Tax credit for residential energy efficiency improvement

Looking for Help with Health Insurance?

Also, this week we discovered the Guru of Health Insurance. He has been a client of ours for some time and we have a lot of respect for him. We invited him to our office this week to teach us a little more about Obamacare and to see if he could help our employees and us with health insurance. This man has read the entire Affordable Care Act from beginning to end. He has started helping our staff find affordable health insurance. Maneuvering through the exchange is very complicated to try and do yourself so if you are not happy with your health insurance situation, feel free to give our office a call and we will be happy to refer you to our Guru.

We wish all of you the happiest Holiday season and hope that it is filled with family, friends and great joy.

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Save Thousands With This Simple Investment Trick

business-exchange

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There is an IRS rule called a 1031 Exchange that allows you to exchange property used for business or investment for other property that is like it and therefore to postpone paying taxes. For example, let’s say you own a rental house and you decide to sell it. Let’s say you will make $30,000 on the sale. If you are planning on purchasing another rental property, you can do it with a 1031 exchange and postpone paying taxes on the sale until you sell the new property. This could potentially save you between $5,000 and $8,000 in taxes.

Here is how it works. Once you have a buyer and a closing date for the sale of the property, you hire what is known as a Qualified Interm. This is a person that holds the proceeds of the sale until you purchase the new property. Then you have 45 days from the time you sell the old property to find and name the new property. Also, you have 180 days from the time you sell the old property to close on the new property. Now you do not have to pay the taxes on the sale of the old property until you have sold the new property. The most important thing to remember is that you cannot take possession of the money from the sale of the property and you must use a Qualified Interm.

This can be done with business equipment and even farm animals. If you are thinking of replacing any asset from your business or from an investment, check with your tax prepare before you do anything. They can inform you of the tax consequences of your plans and help you to know what to do to minimize your tax liability. At Soulence Tax and Accounting we are available to speak with you all throughout the year and to help guide you through decisions that will impact your taxes.

Tax Provisions Reinstated

congress-building

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2014’s tax rules still haven’t been finalized but help is on the way as year- end nears.   Congress had all year to revive a series of tax breaks that lapsed after 2013, but, as usual, tax writers procrastinated.

The word is that all major tax provisions that lapsed at the end of 2013 will be reinstated. For individuals some of the deductions are:

  • Deductions for state sales taxes in lieu of income taxes
  • College tuition
  • Up yo $250 of teachers classroom supplies
  • Direct payouts of $100,000 or less from IRA’s to charity for folks 70 ½ and older

For business:

  • 50% bonus depreciation
  • R&D credit
  • Higher ceilings on expensing assets (179 deduction)

President Obama nixed a tentative deal by the House and Senate negotiators that would have made a number of the breaks permanent, including many key ones for businesses. But the House has OK’d a fallback plan that will revive all key breaks just for 2014. It is expected that the Senate will reluctantly accept the House Bill. However, as a result, the extensions will expire again at the end of 2014 so businesses and individuals will face the same uncertainty again next year about the tax rules as they try to make their business and investment decisions.

A couple of final 2014 tax reminders:

  • Check the balance in your flexible spending account. You must clean it out by Dec. 31 if your employer has not implemented either the 2 ½ month grace period of the $500 carryover rule. Otherwise, you will forfeit any money left in your account.
  • Mail checks for tax-deductible items before Dec 31 to ensure a 2014 write-off. You’re able to claim the deduction for this year even if the checks don’t clear until January. Thus, mailing a charitable donation in late December will nail down the deduction for 2014.
  • Make sure you know the rules if you are charging deductible items. For charges that you make with a retail store credit card (such as Kohls, Cabelas, etc) you are allowed to claim the deduction for the item only in the year in which you pay the bill. For transactions made with a bank credit card, you can take the write-off in the tax year you charge the goods, even if you pay the bill the next year.

As always contact us for help creating your year-end tax strategy.