The tax deadline may seem like a long way off, but with a little planning before the end of the year, you could take advantage of tax breaks to help you lower your tax bill. Several tax provisions are scheduled to expire at the end of this year. This may be your last chance to snag these valuable tax breaks.
Many of the expiring tax breaks have been extended in the past, so it is possible Congress could extend them again over the next few months. That being said, here is a rundown of the expiring tax provisions you should consider before the New Year.
1. Tax Credit for Remodeling Your Home for Energy Efficiency : Homeowners who remodel for energy-efficiency can take a credit of up to $500 over their lifetime. This provision has existed since 2006, so many taxpayers have already used the credit. The credit is 10% of the cost of the building materials used to green your home. These are projects such as adding insulation or a corn stove to your home. There is a separate $500 credit available for energy-efficient appliances. Unless this credit is extended it can only be taken if your energy efficient appliance or item has been installed and is operational by 12/31/2013. So, if you haven’t used the credit yet, there’s still time left to install new windows or buy an energy-efficient air conditioner.
2. Tax Credit for Electric Vehicles: The tax credit for certain 2 or 3 wheeled vehicles expires at the end of the year. However, there still may be time for you to snag up to $7,500 for a qualified 4-wheeled vehicle. Consumers who buy a qualified electric plug-in vehicle may be eligible for a tax credit of up to $7,500 depending on the size of the car’s battery pack.
3. Commuter Benefits : The tax break that puts transit commuters on the same playing field as car commuters may expire. This tax break allows commuters to defer $245 a month of pretax salary to use for transit expenses. This is scheduled to expire at the end of this year allowing the benefit for public transportation to drop to $130 per month pretax.
4. Tax Break for Donated Conservation Property : Until the end of the year, conservationists who donate property or easements on their property to conservation organizations can receive a tax break.
5. Teacher’s Classroom Expense Deduction : School teachers providing primary or secondary instruction, who buy school supplies out of pocket, may be eligible for a $250 deduction for unreimbursed expenses.
6. IRA Distributions To Charity: People older than 70 and a half are required to take minimum distributions from their individual retirement accounts, so this provision allows them to contribute that money to charity without counting those distributions as income. If you are 70 and a half or older, you can transfer up to $100,000 out of your Individual Retirement Account to charity. This provision can keep income low enough for an individual to qualify for other tax breaks that may have phase-out limits.
7. Exclusion of Cancellation of Indebtedness on Principal Residence: The U.S. tax code treats forgiven debts as taxable income. However, if your principle residence is foreclosed or sold in a short sale before the end of the year, this provision allows you to exclude up to $2 million of forgiven debt from your taxable income.
8. State And Local Sales Tax: If you pay state or local income tax, you can deduct that amount from your federal taxes if you itemize. But if you live in a state like Florida or Texas that doesn’t have income tax, you can’t take advantage of that deduction. This provision allows you to deduct state sales tax if your state doesn’t have income tax or if the amount you paid in sales tax was higher than income tax.
This list is not exhaustive, but these are common things that can help you save big at tax time.