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Year-End Tax Planning Challenges Part 1

Year-end tax planning is especially challenging this year because Congress has yet to act on a host of tax breaks that expired at the end of 2013. Some of these tax breaks may be retroactively reinstated and extended, but Congress may not decide the fate of these tax breaks until the very end of this year (and, possibly, not until next year).

These breaks include:

For Individuals

-The option to deduct state and local sales and use taxes instead of state and local income taxes

-The above-the-line-deduction for qualified higher education expenses

-Tax-free IRA distributions for charitable purposes by those age 70- 1/2 or older

-The exclusion for up to $2 million of mortgage debt forgiveness on a principal residence

For Businesses

-Tax breaks that expired at the end of last year and may be retroactively reinstated and extended include

-50% bonus first year depreciation for most new machinery, equipment and software

-The $500,000 annual expensing limitation

-The research tax credit

-The 15-year writeoff for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property

In previous years, a number of “temporary” tax rules, i.e., those having a termination date specified in the code, routinely were extended for one or two years. But this year, Congress has yet to act on a host of important provisions that expired at the end of 2013.

Some or all of these expired provisions may be retroactively reinstated in the lame duck Congressional session in December, thereby opening up some truly last minute year-end tax planning opportunities. However, there's no way of knowing if that will take place. We will watch this closely and report as soon as it happens.

Want to know how this affects your situation? Please send us an email by clicking here, or give us a call at (515) 225-3141.

Disclaimer: The items included in the Tax Tip Tuesday Video Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation. IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advise contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

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