The more things (tax rules) change …

This past Friday, President Obama signed into law the Tax Increase Prevention Act of 2014. Do you remember those Bush tax cuts that were retroactively extended on Jan. 2, 2013 for 2012 and set to expire on Dec. 31, 2013? This bill is basically the same thing except the tax cut extensions will expire on Dec. 31, 2014. This means that nothing substantially is different in the tax laws in 2014 when compared to 2013.

In case your memory is a bit fuzzy, here is a sampling of the Bush tax cuts, at least a few of the more popular items.

Extended tax cuts for individuals include:
• The $250 above-the-line deduction for teachers for expenses paid for books, supplies, computer equipment, and other equipment and materials used in the classroom.

• Mortgage insurance premiums can be treated as deductible interest for purposes of the mortgage interest deduction. This deduction begins to phase out for taxpayers whose adjusted gross income exceeds $100,000 and completely phases out if the adjusted gross income goes over $110,000. If you’re married and file separate income tax returns, you can cut this phase out amount in half.

• The itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes.

• The above-the-line deduction for qualified education expenses. This deduction is capped at $4000, but it is phased out completely when your adjusted gross income exceeds $80,000 ($160,000 for married individuals filing jointly).

• Taxpayers that are at least 70 ½ years old in 2014 can contribute to a charitable organization directly from their individual retirement accounts without being taxed on the distribution.

Extended tax cuts for businesses include:
• Probably the most favorite business deduction for small businesses over the past few years, the generous deduction amount of $500,000 under Section 179 that allows the deduction of certain business property including computer software, qualified lease improvement property, qualified restaurant property, and qualified retail improvement property. The limit begins to phase out when equipment in excess of $2,000,000 is purchased.

• The Work Opportunity Credit, which provides businesses with a tax credit for hiring employees from specified groups such as a veteran, a food stamp recipient, an ex-felon, etc.

• The Indian employment tax credit for employers who hire Indians that live or work on lands that were or are an Indian reservation.

• 50% bonus depreciation on the purchase of new equipment.

There were 51 items in the tax code that were extended in this tax act. Since most of these provisions were originally designed to provide incentives for individuals and businesses to invest or spend their money in certain areas, passing a tax bill 12 days before the incentives expire seems, well … less than authentic. However, today may be a good day to call your CPA to see if there is any money to be saved on your taxes in 2014. However, you need to act now if you are going to be the deadline of Dec. 31.

One final thought; sort of a prediction. Next year is going to be an interesting year for taxpayers. A Republican controlled Congress will push hard for tax reform. The last major overhaul of the Internal Revenue Code was in 1986. It was the third year after I had started my own CPA practice. Mostly what I remember is that I wasn’t making much money. My tax liability for that year increased over $300.

I also remember reading in the Wall Street Journal an article about the tax reform act in 1986. I don’t know who to credit the statement to, but the Journal quoted a gentlemen that stated the 1986 act was essentially Congress taking back what they sold in the past so they could sell it again in the future. He was right back then. If there is a Tax Reform Act of 2015, this gentleman’s quote can be recycled. He will be right again 29 years later.