Are “Tax Extenders” Impacting You?


What is a “tax extender”? Read on for an explanation and to find out why, PHB Partner Craig Ballentine says “I feel like I’ve seen this movie before…”

As we draw closer to the end of the year, taxpayers are in a familiar spot with several expired tax breaks. These breaks, commonly referred to as the “tax extenders,” are a set of rules that generally give most taxpayers extra tax incentives. In recent years, the uncertainty as to whether or not these incentives would be in effect has made tax planning more difficult. In 2013, these breaks were passed retroactively for tax years 2012 and 2013. Last year, Congress extended most of the provisions retroactively at the beginning of 2015 to the beginning of 2014, and only for one year. Efforts to make these tax cuts permanent have not been successful, and this year Congress has spent little time addressing the expiring provisions.

Below are some of the expired tax extenders that commonly impact individuals:

  • $250 “above the line” deduction for certain expenses of school teachers for classroom materials
  • The exclusion from gross income of discharged debt on a primary residence
  • The treatment of mortgage insurance premiums paid as qualified residence interest
  • Deducting state and local sales taxes in lieu of state and local income taxes
  • An “above the line” deduction for tuition and related expenses
  • The ability to make qualified charitable distributions from IRAs without having the include the distributions in income

Other tax extenders that impact businesses:

  • Bonus depreciation on qualified purchases during the year
  • An increase of Section 179 depreciation to $500,000 per year
  • 100% capital gain exclusion from the sale of small business stock
  • A reduced built-in gains tax exposure period to 5 years

There are two bills currently in Congress that renew some of the extenders, but it will likely be late in 2015 before we know their fate. Ultimately, if the idea of these provisions is to spur economic spending, it makes little sense to pass the law after the end of the year. Wouldn’t it make more sense to let the taxpayers know the rules by which they can play, before, or at least during the game, rather than after?  This is where taxpayers find themselves year after year. I feel like I’ve seen this movie before… but will the ending be the same?

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