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Federal Tax Provisions Expiring in 2013

Senate Bill 1859, if passed by the U.S. Senate, House of Representatives, and signed by President Obama, would extend many of the provisions listed in the post below,

While there are over 50 federal tax provisions that expired at the end of 2013, the following are especially noteworthy to many:

Bonus Depreciation Deduction

Prior to 2014, businesses could deduct up to 50% of the value of qualifying assets, e.g. property with less than a 20-year recovery period, during the year in which they were purchased. Unlike Section 179, discussed below, businesses do not need net income to qualify for bonus depreciation and is not limited to small businesses or a particular dollar amount.

Section 179 Deduction

In years past, owners of businesses could take an immediate tax deduction for up to $500,000 of the value of certain types of property. As of 2014, however, that deduction has been reduced to $25,000.

Cancellation of Debt Income on Principal Residence

Home owners who lost their primary residences via foreclosure, deed in lieu, or short sale previously didn't were not liable, in terms of taxation, for what would otherwise be considered cancellation of debt income of up to $2 million. As of 2014, however, such discharged debt is subject to federal taxation as income.

Mortgage Insurance Premium Deduction

As of 2014, home owners who are required to pay mortgage insurance, may now longer deduct the cost of such premiums.

State & Local Sales Tax Deduction

Prior to 2014, taxpayers could choose to deduct either the state income taxes they paid or the state sales taxes they paid on their federal returns. As of 2014, however, taxpayers no longer have this option, which was especially beneficial for those taxpayers who live in states with no state income tax, and can only deduct the amount of state income tax they paid.

Qualified Small Business Stock Exclusion

100% percent of capital gain realized on the sale of qualifying stock acquired in qualifying small business corporations with less than $50,000,000 of gross assets in 2013, can be excluded by shareholders. The acquisition of such stock in 2014, however, will not be subject to such exclusion on sale.

This brief overview of some important considerations associated with expiring federal tax provisions is by no means comprehensive. Always seek the advice of a competent professional when making important legal decisions.

Arizona Tax AttorneyDouglas K Cook is an Arizona tax attorney with over 40 years of experience as a practicing attorney. Although Douglas K Cook's office is located in Mesa, Arizona, he represents clients throughout the Phoenix, Arizona Metropolitan area including the following east valley cities: Scottsdale, Paradise Valley, Tempe, Chandler, & Gilbert.

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