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55 Tax Breaks Just Expired – Money Morning

This is a syndicated repost published with the permission of Money Morning. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

There were 55 tax breaks that expired when the clock struck midnight on New Year’s Eve that will affect millions of American businesses and individuals.

The practice of letting numerous tax breaks expire during Congress’s December vacation has become a yearly tradition. In 2012, 36 tax provisions expired on the last day of the year. In 2011, there were 58.

While Congress has allowed the tax provisions to expire, they have also made a point to eventually renew them retroactively. That has allowed tax payers to claim the breaks on their tax returns. In this case, because the provisions were in effect throughout 2013, they will not affect tax returns until 2015.

But relying on Congress to retroactively renew tax breaks just because they have in the past is an unsettling proposition for tax payers. Congress didn’t renew the provisions that expired in 2011 until New Year’s Day 2013. What if they wait even longer this time?

“It’s a totally ridiculous way to run our tax system,” Rachelle Bernstein, vice president and tax counsel for the National Retail Federation, told the Associated Press. “It’s impossible to plan when every year this happens, but yet business has gotten used to that.”

This year’s expiring provisions range from credits for companies that invest in research and development, to more obscure breaks, like credits for race horse owners.

While some of the obscure tax provisions won’t affect most investors, there are plenty that have far-reaching ramifications…

Happy New Year to you too, Congress!

The 6 Most Important Expiring Tax Breaks

Here are six of the expiring tax breaks that will deliver the biggest impact to taxpayers, investors, and small businesses:

  1. Research and Development: Companies that invest heavily in research and development will no longer receive the hefty tax credits they are accustomed to. This provision benefits numerous industries, including manufacturing, technology, and pharmaceuticals. It was estimated that this tax break brought $6.3 billion in savings to companies in 2013.

In order to qualify for the credit, the research must have been done in the development phase of a new or improved product or business process. Therefore, research dealing with marketing, general data collection, or business management has been excluded in the provision. Much of the research that traditionally qualified for the credit was technological in nature.

  1. Energy Efficiency Cuts: In 2013, those who constructed a home that had a level of heating/cooling that was 50% lower than the annual level of a comparable dwelling were eligible for a $2,000 tax credit. The $2,000 credit may pale in comparison to the cost of a new home, but the ever-increasing emphasis on energy efficiency makes this significant.


Likewise, a provision that credits purchasers of energy-efficient appliances has just expired. That would save the government approximately $700 million in the next 10 years. Finally, a credit for energy-efficient commercial buildings expired in 2013.

  1. Qualified Small Business Stock: Traditionally, individual investors who invest in qualified small businesses can exclude 100% of the gains they received from their yearly income. The stock must be held for more than five years to be applicable. Starting in 2014, only 50% of the gains from qualified small businesses will be excluded.


  1. Tuition and Fees: The above-the-line Tuition and Fees Deduction that has been around since 2002 is another provision that’s disappearing in 2014. The deduction was available to anyone who paid tuition or fees for attending college or a post-secondary school. That includes parents who claim their children as dependents. The maximum deduction was $4,000 per student.


  1. Tax-Free Charitable Contributions from Retirement Plans: A “qualified charitable distribution” allows for tax-free charitable contributions from IRAs for those aged 70.5 years and older. These contributions are not included in the taxpayer’s income, and up to $100,000 per year is allowed. Unfortunately, those septuagenarians who donate $100,000 per year will no longer have access to this tax shelter, unless Congress renews the provision in 2014.


  1. Health Coverage Tax Credit: With a big assist from Obamacare, those who take advantage of Health Coverage Tax Credit (HCTC) can no longer do so as of Jan. 1, 2014. According to the IRS, that credit paid for approximately 72.5% of the premiums for eligible individuals and their families. The HCTC website is now referring new clients to [Read the latest on Obamacare and how much money taxpayers spent on its website.]

If recent history is any indication, Congress will eventually renew many of the 55 tax provisions it cut on Jan. 1, 2014 – but for investors and taxpayers, we have to wait and see when that actually happens.

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