Senate offers good, not great, news about your taxes

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Laura Biskupic Marketing Director
Laura Biskupic
Marketing Director

While they did not make them permanent, members of the Senate did vote last night to extend several tax breaks, which is good but not great news for charities and the tax payers who support them.

The temporary extensions will expire after Dec. 31, 2014, unless Congress votes further extensions in the next session.

Effective immediately, though, donors who want to make an IRA charitable rollover for the 2014 tax year can do so.

The charitable IRA rollover was designed to encourage older American tax payers to donate from their Individual Retirement Accounts. IRA owners age 70 ½ or older can exclude up to $100,000 a year from income if the IRA funds are paid directly to qualified charities. The amount also is considered as the required minimum distribution, or part of it depending on your individual circumstances.

Without this exemption, IRA owners would have to withdraw the funds, pay taxes on them, and then contribute to the charity before claiming the deduction.

This offered less incentive for these types of charitable contributions, especially for tax payers who normally don’t itemize their deductions.

While the temporary extension is a hassle for tax planning, which normally is most effective when effected two years out, it does allow for some immediate deductions including:

1)      Teaching expenses, up to $250, for those who purchase their own supplies.

2)      Tuition fees and deductions

3)      State and local sales tax as an option for itemized deductions if the amount is greater than the state income taxes paid.

4)      Mortgage insurance premiums as an itemized deduction.

Additionally, attached to the extender bill is the Achieving a Better Life Experience (ABLE) Act, which allows people who were disabled before the age of 26 and their family and friends to contribute up to a combined total of $14,000 a year to an ABLE account. Earnings would grow tax free and the money would not disqualify the disabled person from receiving federal assistance benefits like Medicaid and Supplemental Security Income if the money is used to pay for housing, transportation, education and wellness.