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Tax Provisions Expiring and Changing on December 31, 2013


Tax Provisions Expiring and Changing on December 31, 2013

“Out With the Old, In With the New”
Corey Robinson - Herbein + Company, Inc.

As 2013 comes to an end, there are important tax provisions that are currently in effect that will change or expire as of December 31, 2013.  It is important to be aware of these changes and to plan accordingly with your tax professional.  Credits and deductions used on your return this year may not be available next year.  Poor planning can result in paying higher taxes, which means less cash in your wallet.

Below are charts that highlight and summarize some important provisions that will be changing next year:

[table caption="Business Property Provisions"]
Item; Effect in 2013; Scheduled to take effect in 2014
Section 179(b), (c), and (d): Deduction Limit; Section 179 deduction and qualifying property limits are $500,000 and $2,000,000, respectively; Section 179 deduction and qualifying property limits are $25,000 and $200,000, respectively. Also, off-the-shelf software does NOT qualify for Section 179 expensing

Section 179(f): Qualified Real Property; Able to claim the Section 179 deduction on up to $250,000 of qualified real property; Qualified real property is NOT eligible for Section 179 expensing

Bonus Depreciation: 168(k); Taxpayers are allowed 50% special depreciation for qualified property additions in service for 2013; Bonus depreciation is only available for long production-period property and certain aircraft

Qualified Leasehold, Restaurant, and Retail Improvement Property: 168(e)(3)(E); These are assigned a 15-year straight-line recovery period; These are assigned a 39-year straight-line recovery period
[/table]

 

[table caption="S Corporation Provisions"]
Item; Effect in 2013; Scheduled to take effect in 2014

Built-In Gains – “S Corp.”: 1374 (d)(7); A “C Corp.” that elects to be taxed as an “S Corp.” is subject to tax at the highest corporation rate on gains that were built-in at the time of election and that are recognized during the recognition period. For 2013, that period is the S Corporation’s first five years; The recognition period changes from the first five years to the first ten years for the S Corporation

Shareholder Basis Adjustment for Charitable Contributions – “S Corp.”: 1367 (a)(2); S Corporation shareholders reduce their stock basis by their allocable share of the property’s adjusted basis when they make charitable contributions; S Corporation shareholders reduce their stock basis by their allocable share of the property’s FAIR MARKET VALUE (FMV) when they make charitable contributions
[/table]

 

[table caption="Individual Deductions and Exclusions Provisions"]
Item; Effect in 2013; Scheduled to take effect in 2014

Educator’s Expenses: 62(a)(D); If you are a school teacher, instructor, counselor, principal, or aide grades K-12, you can deduct up to $250 out-of-pocket expenses above the line; Deduction expires as of 12/31/13

State and Local Sales Taxes Deduction: 164(b)(5); You can elect to deduct state and local general sales taxes instead of state and local income taxes; Deduction expires as of 12/31/13

Tuition and Fees Deduction: 222; You can claim an above-the-line deduction for tuition and fees for qualified higher education expenses; Deduction expires as of 12/31/13
[/table]

*IRC Section Number Italicized Credit to Thomson Reuters/Practitioners Publishing Company

We also wanted our clients to be aware of the Research Credit 41(f) and (h)(1) that is set to expire for 2014. This credit was available in 2013 for the cost of increasing research activity.

For additional information please contact the author Corey S. Robinson at 610-378-1175 or [email protected].

Corey-Robinson