tax increase prevention act - Linkenheimer LLP CPAs & Advisors

Tax Increase Prevention Act of 2014

Dear Client and Friends:

The Tax Increase Prevention Act of 2014 (the Act) was passed on December 16, 2014. Thankfully, the Act retroactively extends most the federal income tax breaks that would have affected many individuals and businesses, but only for one year through 2014. This leaves precious little time to take advantage of these tax breaks. The Act also includes another bill, the “Achieving a Better Life Experience Act (ABLE) of 2014.” ABLE establishes a new type of tax-advantaged account for disabled individuals, allowing them to save money for future needs while remaining eligible for government benefit programs. Here is a quick summary of the most important tax changes—starting with those that affect individuals.

Extended Tax Breaks for Individuals

Qualified Tuition Deduction. This write-off, which can be as much as $4,000 or $2,000 for higher-income folks, expired at the end of 2013. The Act retroactively restores it for 2014.

Tax-free Treatment for Forgiven Principal Residence Mortgage Debt. For federal income tax purposes, a forgiven debt generally counts as taxable Cancellation of Debt (COD) income. However, a temporary exception applied to COD income from cancelled mortgage debt that was used to acquire a principal residence. Under […]

Research Credit Extended Under New Law

On December 19th, President Obama signed into law HR 5771, the “Tax Increase Prevention Act of 2014” (TIPA). The bill generally provides for a 1-year extension, through 2014, of over 50 expired or expiring individual, business, and energy provisions which exist year after year, although on a temporary basis.

TIPA retroactively extends the research credit for one year to apply to amounts paid or accrued before January 1, 2015.

So, because the extension of the research credit is retroactive to include amounts paid or incurred after December 31, 2013, taxpayers, such as fiscal year corporations that already filed returns for fiscal years that ended in 2014, should consider filing an amended return to claim a refund for the amount of any additional tax paid because of not claiming amounts now eligible for the tax credit.

Written by Mike Musson, CPA, Partner