CREJ - Journal

Page 18 —

COLORADO REAL ESTATE JOURNAL

— January 21-February 3, 2015

Law & Accounting

ith few days remain-

ing before the end of

the 2014, Congress

passed and the president signed

the Tax Increase Prevention Act

of 2014. The legislation provides

taxpayers relief for 2014 by ret-

roactively extending nearly all

tax provisions that expired at the

end of 2013. Here are some of the

key individual and business pro-

visions renewed through Dec.

31, 2014:

Individual Provisions

• Above-the-line deduction up

to $250 for certain unreimbursed

expenses of elementary and sec-

ondary schoolteachers

• Itemized deduction for state

and local sales taxes in lieu of

state and local income taxes

• Above-the-line deduction

for qualified tuition and related

expenses

‧ Up to $4,000 for taxpayers

with adjusted gross income

of $65,000 or less ($130,000

for joint filers) or up to $2,000

for taxpayers with AGI of

$80,000 or less ($160,000 for

joint filers)

• Premiums for mortgage

insurance deductible as qualified

interest

‧ Deduction phases out by

10 percent for each $1,000 of

income exceeding $100,000 of

AGI; the phase-out begins at

$50,000 for married persons

filing separate returns

• Exclusion of discharge of

principal residence indebtedness

from gross income for individu-

als

‧ May exclude up to $2 mil-

lion of cancelled or forgiven

qualified principal residence

indebtedness from taxable

income if discharged before

Jan. 1, 2015

• Tax-free distributions from

individual retirement accounts

for charitable purposes

‧ Tax-free treatment of dis-

tributions to a qualifying

charity from an IRA held by

someone age 70½ or older of

up to $100,000 per taxpayer

for each year; for the 2014

tax year, a charitable donation

from an IRA must have been

made before Jan. 1, 2015

Business Provisions

• Tax credit for research and

experimentation expenses

‧ The research credit gener-

ally equals 20 percent of any

excess of qualified research

expenses for the tax year

over a specific

base amount,

unless the tax-

payer elected

an alterna-

tive simpli-

fied research

credit

•

Inter-

nal Revenue

Code Section

179 expensing

up to $500,000

with $2 mil-

lion phase-out

‧ Under Sec-

tion 179, a

taxpayer (other than estates,

trusts and certain noncor-

porate lessors) can elect to

deduct as an expense, rather

than depreciate, up to a speci-

fied amount of the cost of

new or used tangible person-

al property placed in service

during the tax year in the

taxpayer’s trade or business

• Fifty percent bonus depre-

ciation and election to accelerate

alternative minimum tax credits

in lieu of additional first-year

depreciation

‧ To qualify for bonus depre-

ciation, the original use of

the asset must commence

with the taxpayer; original

use is the first use to which

the property is put, whether

or not that use corresponds

to the taxpayer’s use of the

property

• Fifteen-year straight-line cost

recovery for qualified leasehold,

restaurant and retail improve-

ments

• Reduction in S corporation

recognition period for built-in

gains tax to five years

‧ An S corp. generally is not

subject to tax but instead

passes through its income to

its shareholders, who pay tax

on their pro rata shares of the

S corp.’s income; where a C

corporation elects to become

an S corp., the S corp. is taxed

at the highest corporate rate

(currently 35 percent) on all

gains built in at the time of

the election if the gain is rec-

ognized during a recognition

period; absent any further

extension of the reduced rec-

ognition period, beginning

Jan. 1, 2015, the recognition

period is the 10-year period

beginning with the first day

of the first tax year for which

the corporationwas an S corp.

• Work Opportunity Tax Credit

‧ WOTC offers employ-

ers that hire

members of

certain target-

ed groups a

credit against

income tax of

a percentage

of first-year

wages up to

$6,000

per

e mp l o y e e ;

however, the

m a x i m u m

WOTC

for

hiring a quali-

fying veteran

can be as high as $9,600.

•Alternative Fuel andAlterna-

tive Fuel Mixture Credit

‧ Fifty cents per gallon alterna-

tive fuel tax credit and alter-

native fuel mixture tax credit;

this credit is commonly appli-

cable for taxpayers who use

propane or liquefied petro-

leum gas to fuel vehicles not

required to be registered for

highway use, e.g., forklifts;

the credit applies to fuel sold

or used before Jan. 1, 2015

• Indian Employment Tax

Credit

• Accelerated depreciation for

business property on Indian res-

ervations

• Special rules for qualified

small-business stock

• Basis adjustment to stock of

S corps making charitable contri-

butions of property

• NewMarkets Tax Credit

Several expired provisions

were not extended, including

a health care tax credit for dis-

placed workers; plug-in electric

vehicle credit; partial expensing

of refinery equipment; energy-

efficient appliance credit; and

New York Liberty Zone tax-

exempt bond financing.

ABLE Accounts.

The legisla-

tion also includes a new provi-

sion known as the Achieving a

Better Life ExperienceAct, which

allows states to establish tax-

free savings accounts for certain

expenses of severely disabled

individuals, similar to state Inter-

nal Revenue Code Section 529

college savings plans. Specifical-

ly, the program allows families

of disabled individuals to con-

tribute up to $100,000 to anABLE

account. Withdrawals from the

account will be tax-free if used to

pay for qualified living expenses

of the disabled, such as hous-

ing and education. In addition,

Understanding federal tax relief

Tad A.

Goodenbour,

CPA

Partner, BKD LLP,

Colorado Springs

Robert Conner,

CPA

Tax manager, BKD

LLP, Springfield,

Missouri

Please see BKD, Page 21

24392

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