Congress Passes Extenders Package & ABLE Act

December 20, 2014

Congress approved HR 5771 (the Tax Increase Prevention Act of 2014), which retroactively extends the "tax extenders" through the end of 2014.

Tax Increase Prevention Act of 2014:

With the passage of the TIPA2014, Congress has extended many provisions that were set to expire at 12/31/2013. We are highlighting only a few of these below:

• The deduction for state and local sales taxes in lieu of state income taxes
• A rule that allows individuals to exclude from gross income the discharge of indebtedness on a principal residence
• The deduction for private mortgage insurance premiums as qualified residence interest for purposes of the mortgage interest deduction, phasing out at adjusted gross income levels of $100,000 to $110,000
• A rule that allows those age 70-and-a-half or older to make up to $100,000 in tax-free distributions to charities from their individual retirement accounts
• The "above the line" deduction for qualified tuition and other related expenses for individuals below certain income levels, worth up to $4,000
• The "above the line" deduction for teachers for up to $250 in out-of-pocket classroom expenses
• The increased contribution limits and the carryforward period for amounts in excess of the limits for contributions of capital gain real property made for qualified conservation purposes, as well as the special contribution rules for farmers and ranchers
• A provision of the 2009 economic stimulus law (PL 111-5) that equalizes the tax-free benefits employers can provide for transit and parking, excluding them from wages for both payroll and income tax purposes - transit and parking will both be $250 per month for 2014
• Another significant business extender, at a cost of nearly $1.5 billion over 10 years, involves 50% bonus depreciation rules for property placed in service before the end of 2014 (and through 2015 for certain transportation property, as well as certain longer-lived items). This provision allows businesses to deduct from their taxes 50% of the value of that property in addition to amounts that they could otherwise claim under depreciation rules.
• The bill maintains the expensing limit under IRC Section 179 to $500,000, with the phase-out beginning when investments exceed $2 million for 2014

ABLE (Achieving a Better Life Experience) Act

The ABLE act creates tax-favored accounts for individuals with disabilities for tax years 2015 and beyond. The purposes of this act is to encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life.

The ABLE act also provides authorization for 529 plans to permit investment direction changes to occur up to two times per year, beginning in 2015.