In the second part of our series on 2013 Year-End Tax Planning for individuals, we focus on extended tax benefits.
EXTENDED TAX BENEFITS
Although some tax benefits were extended through 2017, others were extended only through the 2013 tax year. If any of the tax relief applicable to your situation is set to expire after 2013, you should try to take advantage of it in the current year.
American Opportunity Tax Credit (AOTC). The AOTC is extended to apply to tax years beginning before 2018, including the $2,500 maximum credit per eligible student, the higher income phaseout ranges of $80,000 to $90,000 for single filers ($160,000 to $180,000 for joint filers), the eligibility extension to the first four years of post-secondary education, the inclusion of text books and course materials as eligible expenses, and the 40 percent refundable credit component.
Higher education tuition deduction. The above-the-line deduction for qualified tuition and related expenses is extended through 2013. Since the deduction is an adjustment to gross income, it can be taken even if the taxpayer does not itemize deductions, and it is not subject to the two-percent-of-AGI floor or the overall limitation on itemized deductions. However, an individual who can be claimed as a dependent by another taxpayer cannot take a deduction for qualified tuition and related expenses.
Student loan interest deduction. The increased phaseout thresholds for the student loan interest deduction were made permanent, and continue to be adjusted each year for inflation. In addition, the 60-month limitation on the deduction and the restriction that makes voluntary payments of interest nondeductible are permanently repealed.
Popular extenders. Unless extended by Congress, the following popular tax benefits may not be available after 2013:
- the $250 above-the-line annual deduction for a professional educator’s qualified unreimbursed expenses, including books, supplies, computers, and software;
- the exclusion from gross income for discharges of qualified principal residence indebtedness;
- the itemized deduction for mortgage insurance premiums;
- the election to claim an itemized deduction for State and local general sales taxes in lieu of State and local income taxes;
- the exclusion from gross income of qualified charitable distributions for individuals aged 70½ or older; and
- the residential energy property credit (lifetime limit remains at $500, and no more than $200 of the credit amount can be attributed to exterior windows and skylights).
Every tax situation is different and requires a careful and comprehensive plan. We can assist you in aligning traditional year-end techniques with strategies for dealing with any unconventional issues that you may have. Please call our office at (302) 225-5000 or email at email@example.com to schedule an appointment.