To quote that famous Italian-American philosopher Yogi Berra, “It’s déjà vu all over again.” Earlier this year, I recounted how on New Year’s Eve I sat and wondered what I was celebrating, because all of the tax extenders had expired.
Fast forward to December 17, 2014, and I sat in front of my computer again and drafted a letter to Santa asking him to answer my Christmas wishes and get the Senate to vote on the bill known as H.R. 5711—Tax Increase Prevention Act, commonly known as the Extenders Bill. Two days later, the Senate passed the bill by an overwhelming margin, and President Obama signed it into law on December 19.
In short, my Christmas letter to Santa Claus was answered, and my belief that Christmas miracles can happen remains intact. However, as I count down the hours, minutes and seconds to midnight 2015, ringing in the New Year I will once again be sitting there with the entire list of extenders expiring. We will, yet again, begin a new year not knowing what the rules will be. Déjà vu all over again.
The status of that legislation in 2015 will be the subject of a future article.
Now let us write a thank you letter to Congress for giving us the extenders bill retroactive to January 1, 2014.
Thank you for passing H.R. 5711 and giving us retroactive application of the various provisions in the bill. School teachers are grateful for being able to deduct up to $250 of their classroom expenses. Home owners are thankful that they will be able to exclude the income they have to recognize as a result of the discharge of indebtedness on their principal residence. Individuals who itemize can now deduct sales tax in lieu of income taxes. Parents of college-age students can now deduct qualified tuition and related expenses. Thanks to your actions, individuals can choose to contribute a portion of their Individual Retirement Accounts directly to charity.
American businesses are also grateful that they can take tax credits for increasing research activities, construction of low income housing, the employment of targeted individuals, and several other business credits. American businesses also are grateful that they can expense up to $500,000 for the purchase of assets used in business, rather than being limited to the $25,000 previously allowed. We are also grateful for being able to expense up to 50 percent of the cost of new assets that are placed into service before year end. We also like the fact that we can take accelerated depreciation on qualified leasehold improvements.
Owners of small businesses thank you for reducing the period to recognize built-in gains on the sale of S corporation stock from 10 to five years, and extending the 100-percent exclusion of gains on the sale of small-business stock that was held by non-corporate taxpayers for more than five years.
American also are thankful for the extension of various energy incentives, including the credit for energy efficient residential and commercial buildings, and the second-generation biofuel production credits. We know there are many items we are leaving off this list, because they are too numerous to name.
The American people would like to ask you one favor for next year. Will you please bring us the tax laws a little earlier in 2015? It was kind of difficult to make sure our new equipment was purchased and placed in service when we only had 11 days to plan. Maybe instead of giving us a Christmas present next year, you could bring it as, say, an Easter present?
In any case, thank you again for thinking of us during this Holiday Season.
With warmest regards,
The American Taxpayer
Now let’s hope that in December of 2015, I’m not writing about this same topic, because it will mean that Congress has failed to act again on passing tax legislation that gives American business time to plan and react. In short, it will be déjà vu all over again.
Richard "Woj" Wojciechowski is a partner based out of our Buffalo, NY office.