2014 Tax Developments (sort of)

The US Senate is on track to hold a vote next week to restore nearly all of the key tax provisions that expired at the end of 2013 (details below).  Meanwhile, over at the US House of Representatives, the process is moving along but at a slower pace.

The House did approve legislation to permanently extend the Research & Development tax credits and will take up additional tax legislation on a bill-by-bill basis.  Accordingly, final reconciliation most likely won't occur until late in the year (read that as AFTER THE MID-TERM ELECTIONS).  You heard it here first, folks (OK, maybe not first but you did hear it here).

Here is a listing of the tax provisions that expired in 2013 and that we believe will be re-instated retroactively to January 1, 2014:

• The $500,000 cap on expensing business assets under Code Sec 179 (it was $500,000 for 2013 but dropped to $25,000 for 2014 with the 2013 expirations);
• The election for folks 70 1/2 and older to transfer up to $100,000 from their IRAs directly to Charity;
• The $2 million exclusion for debt forgiven on a primary residence; and
• The election to write off state sales taxes in lieu of state income taxes.

There are other provisions that are on the table and we'll keep you updated as news becomes available.  We do not believe that any of the generous "Bonus Depreciation" provisions for businesses will be re-instated.

Finally, for 2014 the estate and gift exemption amount is set at $5.34 million and it will rise annually with inflation.  The Obama Administration wants to raise the Estate & Gift tax rate by 5% (to about 45%) and cut the exemption amount to $3.5 million but the House Republicans have balked and we don't believe there is any reason to think that the Administration will get their way on this.

Enjoy your Spring! We'll be writing more in a few weeks.