Popular Tax Breaks Expiring In 2013
The Internal Revenue Code, as you may be aware, is about as permanent as a Britney Spears marriage and as simple to understand as the Human Genome Map. Each year there are many new code sections and many Code sections that expire, and 2013 is no exception. There are several tax breaks expiring in 2013.
As a result, taxpayers may want to consider taking advantage of these tax breaks while they still exist as part of any year-end tax moves. Along the same lines, taxpayers who have been utilizing these tax breaks expiring in 2013 may want to prepare for the possibility of these tax breaks not being available for the year 2014, and adjust their withholding or estimated tax payments for 2014 accordingly. In order for these tax breaks to be renewed, Congress would need to pass new legislation to extend these tax breaks to future years.
The following is a list of some of the more common tax breaks expiring in 2013:
Exclusion for Cancellation of Debt Income on Principal Residence
Debts that are forgiven or canceled are generally considered taxable income However, if your principle residence is foreclosed or sold in a short sale before the end of the year, this provision allows you to exclude up to $2 million of forgiven debt from your taxable income. In those cases, the mortgage debt forgiveness can qualify to be exempt from the income tax. This special provision expires at the end of 2013. For 2014, mortgage debt that is canceled by a lender as part of a loan restructuring or foreclosure or short sale will be taxable, unless another exception applies.
Educator Expense Deduction
Teachers, principals, and other K-12 educators can deduct up to $250 of their job-related expenses (well below what most teachers spend on their classroom and students) as an above-the-line deduction. This deduction expires at the end of 2013. For 2014, educators will be able to deduct their classroom expenses only as part of an itemized deduction.
Tuition and Fees Deduction
The above-the-line deduction for college tuition expires at the end of 2013. For 2014, both the Lifetime Learning Credit and the American Opportunity Credit will be available for college students.
Mortgage Insurance Premium Deduction
Homeowners can deduct the cost of mortgage insurance premiums as part of their deduction for mortgage interest. However, this deduction expires at the end of 2013.
State and Local Sales Tax Deduction
Individuals can deduct state sales tax in lieu of the deduction for state income taxes, and is particularly valuable for taxpayers who live in states with no income taxes. This was particularly beneficial to taxpayers in those states that don’t have income taxes, like Washington or Texas.
Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on the taxation of US taxpayers. Our services include planning for tax breaks expiring in 2013 in order to minimize your tax liability and the impact of the expiration. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate Americans abroad on their tax responsibilities, so that they can look for planning alternatives on time. They are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid. If you found this article helpful, you’ll likely benefit from our future ones as well – so we encourage you to avoid pitfalls and join our mailing list:
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Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.