Each year, many children across the world wait to see what Santa will bring them for Christmas. But if you're into taxes, the jolly fellow isn't anywhere on your radar. Instead, you're waiting to see what Congress gives you this year -- hopefully by the time you read this piece.
I was hoping that Congress would break tradition by passing the Extenders (that annual event whereby our elected official pass a host of expired and popular tax provisions just in time to be on your current year tax return -- ergo "the Extender package) before now but no such luck. Based on current news, it does seem likely that the extenders will be passed and they will be retroactive to January 1, 2015. It appears a large number of the extenders, and the soon to expire expanded Earned Income Credit, Child Tax Credit, and the American Opportunity Credit, will be made permanent so we won't have to participate in this fire drill every year or two.
Basically, there are three categories of extenders -- those that affect individuals, those that affect businesses, and those that encourage alternative energy solutions. The extenders provide tax relief for individuals and families with tax credits, deductions, and incentives for charitable giving. There are business incentives for growth, jobs, investment, research, and innovation and incentives for energy productions and conservation.
If this legislation passes, some of the important tax implications for individuals relate to deductions. First, the state and local sales tax deduction option, which allows taxpayers to choose the sales tax deduction over the state income tax deduction. This is most beneficial to taxpayers in states with little or no income tax. Another nice deduction is for teachers. They can deduct up to $250 of their eligible expenses when they buy supplies for their classrooms. With the new legislation, beginning in 2016, they can use professional development expenses as well. And the $250 limit may be adjusted for inflation. And, though it's not a deduction, the ability for individuals 70½ and up to exclude up to $100,000 of an IRA distribution from their gross income when it is used for charitable purposes is a pretty nice incentive to give.
In total there about 50 plus tax provisions that impact taxpayers in one form or another as part of the Extender Tax package, which includes a gift for almost every taxpayer somewhere. Even though not passed at the time of this piece, there is much agreement on all sides that the expired provisions should be put back into law saving taxpayers millions of dollars and as I noted earlier, passage is all but assured, except for timing and a few other matters. So watch the developments over the coming days, or look at the new law after it is passed and see if there is gift for you in the coming legislation or hopefully by the time you read this -- the legislation already passed with a nice tax benefit for you in it.