Under current tax laws, dozens of temporary tax provisions are scheduled to expire at the end of 2013. Most of the provisions were part of the past temporary tax extension legislation. Others were extended as part of the American Taxpayer Relief Act.
Collectively, temporary tax provisions that are regularly extended by Congress, often for one or two years, rather than being allowed to expire as scheduled, are often referred to as “tax extenders.”
The provisions that are scheduled to expire in 2013 are diverse in purpose, including provisions for individuals, businesses, charities, energy, community assistance and disaster relief.
The majority of the provisions set to expire at the end of 2013 were temporarily extended as part of the Relief Act. There were, however, a number of provisions that had previously been included in the “tax extenders” legislation that were not extended under the act.
Going forward, Congress may choose to address expiring tax provisions as part of tax reform, deciding at that time which temporary provisions should become a permanent part of the tax code. Alternatively, Congress may choose to develop a tax extender package, extending some or all of the provisions that have previously been extended in “tax extender” legislation.
The Congressional Budget Office provides estimated costs of extending all tax provisions scheduled to expire between 2013 and 2023 of $938.3 billion. Extending the child tax credit, the earned income tax credit, and the American Opportunity Tax Credit currently set to expire at the end of 2017 would cost $140.4 billion.
Listed below are some of the primary tax provisions expiring in 2013.
- Above-the-line deductions for certain expenses of elementary and secondary school teachers
- Deduction of state and local sales taxes
- Above-the-line deduction for qualified tuition and related expenses
- Premiums for mortgage insurance (PMI), deductable as qualified interest
- Parity for exclusion for employer-provided mass transit and parking benefits
- Exclusion of discharge of principal residence indebtedness from gross income
- Credit for health insurance costs of eligible individuals
- Tax credit for research and experimentation expenses
- Work opportunity tax credit
- Credit for railroad track maintenance
- Employer wage credit for activated military reservists
- Special rules for qualified small business stock
- Increase in expensing to $500,000/$2,000,000 and expansion of definition of Sec. 179 property
- Bonus depreciation
- Reduction in S Corporation recognition period for built-in gains tax
- Low income housing tax credit rate
- Credit for construction of energy efficient new homes
- Energy efficient commercial building deduction
- Mine rescue team training credit
- Election to expense mine-safety equipment
- Credit for energy efficient appliances
- Credit for nonbusiness energy property
- Alternative fuel vehicle refueling property
- Incentives for alternate fuel and alternative fuel mixtures
- Incentives for biodiesel and renewable diesel
- Placed -in-service dates for partial expensing of certain refinery property
- Credit for electric drive motorcycles and three-wheeled vehicles
- New markets tax credits
- Empowerment Zone tax incentives
Many of these “tax extenders” have been extended in the past, so be aware of what Congress does before year-end — and as we know sometimes after year-end — with the tax laws.
Kenneth R. Diel is managing member of Diel & Forguson LLC.