In January 2013, taxpayers experienced several major alterations to tax laws that created a number of new taxes and requires them to adjust their methods for tax planning. It doesn’t appear that 2014 will hold quite as many changes for taxpayers – but several possible alterations may raise some eyebrows.
The challenge for taxpayers each year is estimating whether lawmakers plan to extend tax breaks that are set to expire on December 31. These last-minute decisions affect business and individual taxpayers.
For many years, homeowners who had a portion of their mortgage debt forgiven weren’t required to define their debt reduction as taxable income. JP Morgan Chase, Bank of America and other national banks have begun to modify loans as part of settlements with state attorneys and regulators. The loss of other credits and deductions could boost taxes, including sales tax deductions, tuition deductions for higher education and energy-efficiency credits for homeowners.
Public-transit commuters will soon be feeling the effects of a new tax leveling the amount of tax-free subsidies they can receive from employers to put towards commuting expenses. These commuters will now be granted $130 per month compared to the previous amount of $250 per month. Employees who drive to work will continue to receive the higher amount, causing debate about this particular tax policy.
A provision for small businesses that offers them the opportunity to deduct all of the cost of certain forms of property has received a significant amount of attention. But bonus depreciation affects small and large businesses, and many Washington insiders credit this provision for assisting larger corporations such as GE in reducing tax bills.
Certain provisions affect particular industries. Benefits for racehorse owners, motorsports complexes and railroad-track maintenance have expired, as well as benefits for railroad-track services. These provisions are often relatively small, but they can make a major impact on businesses throughout the United States. Targeted tax breaks often have a dramatic impact on businesses. As a result, leaders in these industries try to exercise their political power to have them extended.