Every year for the past several years, Congress has passed a series of what are referred to as “tax extenders” – reinstatements of tax deductions and credits that have expired before the current tax year. It did so again in 2014, renewing several key tax breaks for individuals that apply exclusively to the 2014 tax year.
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Taxpayers with forgiven mortgage debt on their principle residence can now exclude up to $2 million of that discharged debt from gross income. Traditionally, discharged debt of any kind qualifies as income to the taxpayer and is taxed accordingly.
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For tax purposes, mortgage insurance premiums are treated the same way as mortgage interest payments and are deductible.
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Energy efficient improvements to homes qualify for a tax credit of up to $500 (a direct reduction in tax liability). Upgraded air conditioning and heat pump systems, new windows,
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Residents in states without an income tax received a gift in the form of an extension of a provision that allows taxpayers to choose to deduct state and local sales taxes rather than state and local income taxes. This itemized deduction can be calculated using a calculator provided by the IRS to estimate sales tax paid throughout the year.
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College students or parents of college students with income of up to $65,000 for a single taxpayer or $130,000 for taxpayers filing jointly who pay higher education expenses are eligible for an above-the-line deduction of up to $4000. That deduction drops to $2,000 for those with income between $65,000 and $80,000 (single) or between $130,000 and $160,000 (joint). Those with incomes above those amounts are not eligible for the deduction.
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Individuals who are 70 ½ and older can make tax-free distributions to certain public charities from their IRAs. Distributions of up to $100,000 are eligible.
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Elementary and secondary school teachers who purchased educational items out-of-pocket for their classrooms are eligible for a $250 above-the-line deduction.
