It’s become a yearly ritual: Toward the end of the year, members of Congress put together a bill designed to extend tax breaks that have expired.
Last year, Congress passed a tax extender bill for 2014 that retroactively extended certain breaks that expired in 2013 through 2014. That move meant that tax-year 2014 enjoyed some breaks, but that two weeks later many of the provisions expired for tax-year 2015.
This time, Congress is once again including extensions that expired at the end of last year, but the difference is that these provisions would be good through the end of 2016, instead of through the end of the current tax-year.
So, what are some of the tax breaks in this year’s extenders bill? Here are some of the highlights:
- $250 above-the-line deduction for education professional who buy their own supplies
- Mortgage debt forgiveness
- State and local taxes
- Mortgage insurance premiums
- Tax-free distributions from IRAs when the money is used for charity
- Above-the-line deduction for higher education expenses
- Employer-provided mass transit and parking costs
- Energy-related tax breaks for wind systems and biodiesel
- Special rules for contributions of capital gains on real property for conservation purposes
There are plenty of other extensions in the bill that might impact taxpayers, although there’s no guarantee that all of the items listed in the legislation will pass muster. However, some of the provisions are popular enough that they will likely be extended again — for what might be the third, fourth, fifth or even sixteenth time.
Some of the more popular exclusions include the deduction for educational professionals who buy their own supplies and the mortgage insurance premiums. Many taxpayers also like to take advantage of the deduction for general state and local taxes and the higher education expenses. The energy-related tax breaks are also popular, even though fewer people use them. Likewise, the public transit and parking benefits are popular among many who work in urban environments.
Other exclusions, such as those related to IRA distributions and capital gains, appeal more to the wealthy. However, there are extenders that almost anyone can appreciate sprinkled throughout the bill.
Earlier Passage Should Help with Tax Planning
The fact that this bill made it through the Senate Finance Committee back in July is a significant improvement over years past. In other years, just getting the bill through committee often doesn’t happen until the final month of the year. Last year, the IRS even experienced a delay in opening tax filing season in order to accommodate the last-minute passage of the extenders bill.
This year, there are hopes that the tax extensions will be passed well before the end of the year. As a result, it would give taxpayers more time to prepare for the realities of their taxes for 2015. If you are interested in some of the possible extensions, carefully look through the bill to see what you might still be eligible for, even if you thought the tax break expired at the end of last year. As long as Congress really does make its decision and get everything squared away before December, you probably still have time to figure out what matters to you.
You can also get a jump on future planning once this bill makes it through Congress. If they really do extend some of these breaks through 2016, this will help you avoid uncertainty in the coming tax year.