At the end of last year, 55 tax breaks1 and incentives known as “tax extenders” expired. Several of them were corporate (57%) and related to things such as research, experimentation, and energy use.2 But there are two in particular that we think could affect you if they’re not extended this year.
We’re writing to make you aware of them as you develop your tax planning strategies for 2014 and beyond.
1) Deducting State Income vs. Local Sales Taxes
This provision allows for taxpayers to choose between deducting state income taxes vs. state sales taxes. So, if you live in a state with a high income tax, like New York or California, you could opt to deduct your state income tax versus deducting sales taxes. The opposite would be true for a state like Florida or Texas, where there is no state income tax. In those cases, you may want to deduct state sales taxes on your return.
Next Steps: Speak with a tax professional about what to do this year, especially if you have to pay estimated taxes quarterly. If this law changes, it could affect what deduction you’re allowed to take and could thus impact the quarterly estimates you pay as you go through this year.
2) Charitable Giving Tax Deduction
Since 2006, investors over the age of 70 ½ have been able to rollover $100,000 from an IRA to a charity – tax free. What’s more, such a rollover would count towards your required minimum distribution (RMD), and you wouldn’t have to pay any income taxes on it.
Next Steps: If you were considering donating from your IRA to charity this year, it’s probably a good idea to wait until later in the year to do it – wait and see if Congress extends this rule and then plan from there.1
Talk with your financial advisor and a tax professional about how these changes may affect your tax planning strategies for 2014, and make adjustments as needed. If you would like the help of one of our Wealth Managers to review your current situation and have a conversation about your investment plan for the long-term, please do not hesitate to give us a call at 1-800-541-7774. If you don't have an investment plan, you can get started by answering a few questions here.
Sources:
1 Reuters
2 The Committee for a Responsible Federal Budget
To the extent this presentation includes any federal tax advice, the presentation is not intended or written by WrapManager, Inc. to be used, and cannot be used, for the purpose of avoiding federal tax penalties. WrapManager, Inc. does not advise on any income tax requirements or issues. Use of any information presented by WrapManager, Inc. is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.
