BY DEBRA L. SMITH, CPA
On Jan. 1, 2014, more than 50 temporary tax
breaks for business and individuals expired.
On Dec.19, 2014, President Obama signed
the Tax Increase Prevention Act that extended
dozens of these expired tax breaks retroactively
for all of 2014. The act included extensions for
all types of tax payers including business, individuals
and multiemployer tax plans, but this
summary will only address the more common
items that will affect businesses and is not a
complete list of all extended items.
A complete copy of the Act can be found at
www.congress.gov.
The Tax Increase Prevention Act extended
the following items which means, if applicable,
they can be utilized when preparing your 2014
business income tax returns this year:
• As of Jan. 1, 2014, the limit on the amount
of qualifying property that could be deducted in
the year of purchase as section 179 depreciation
had decreased to $25,000. The Act increased
this limit to $500,000 for purchases made in
2014.
• Bonus depreciation, the ability to expense
50 percent of the cost of an assets as depreciation
in the year of purchase, was reinstated (the
asset must be a new asset – it can’t be used).
• Accelerated depreciation for qualified
leasehold improvements, restaurant and retail
improvements was extended whereby a business
owner can elect a shorter depreciable
life of 15 years (rather than 39 that might be
required) for these types of assets.
• A shortened recognition period of 5 years
(rather than 10 years) can be used related to built-in gains that arise as a result of converting
a C corporation to an S corporation.
• Tax credits for increasing research activities
have been extended.
• The Work Opportunity Tax Credit (WOTC)
has been extended for employing veterans or
other members of targeted groups including
ex-felons, SSI (Supplemental Security Income)
recipients, SNAP (Food Stamp) recipients,
and TANF (Temporary Assistance for Needy
Families) recipients, among others.
• The Biodiesel and Renewable Diesel Fuels
Mixtures credits have been extended allowing
a portion of excise tax paid to be refunded
as a credit based on the number of gallons of
biodiesel used.
• Tax credits for building energy-efficient
commercial buildings (commonly known as
179D) and energy-efficient new homes has
been extended.
• The credit for differential wage payments
paid to members of the uniformed services.
• Race horses were determined to be property
to be depreciated over three years.
These extenders are valid for the 2014 year.
As such, unless another extension is approved by Congress this year, many of the tax breaks
noted above, and others for individuals, have
expired as of Jan. 1, 2015.
New repair regulations must also be considered
for fixed assets for 2014. There are many
moving parts to these regulations, but doing
nothing, especially if you have real property,
should not be considered an option. There are
elections that may need to be made as well as
change of accounting methods that should be
considered in order to remain in compliance
with the new laws.
The IRS has been quoted as stating “there are
new laws in the regulation, so if the taxpayer
does nothing there is no way they can be in
compliance with the new regulation”.
There are also options that are available only
for 2014. Declining to take advantage of some
of them now could have a negative impact on
you or your business if you try to implement
them after 2014.
If you have questions about these, or other
tax law provisions or changes, you should contact
a tax professional.
Smith is a tax manager with Marvin and
Company, PC.
Photo Courtesy Marvin and Company PC