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Tax Provisions That Expire In 2013

  Sanjiv Gupta CPA  Published 
Tax Provisions That Expire In 2013

There are many tax provisions that are scheduled to expire at the end of 2013. You should consider taking advantage of these provisions while they exist.

Tax Breaks For Individuals

Exclusion for Mortgage Debt Cancellation on Primary Residences

In general, debts that have been canceled or forgiven are considered to be taxable income. There has been an exception for mortgage debt canceled between 2007 and 2013 if the debt was canceled because of a short sale, mortgage restructuring or foreclosure.

Distributions From Retirement Plans Are Tax-Free If It Is For Charitable Purposes

Individuals that are at least 70.5 years old can distribute funds from a retirement account directly to the charity of their choosing up to $100,000 per year as a qualified charitable distribution. These qualified charitable distributions are tax-free and may satisfy the minimum plan distribution rules.

Qualified Small Business Stock Exclusion

Investors are able to sell a qualified small business stock. 100% of the gains from the sale of the stock will be excluded from income. After 2013, only 50% of the small business stock gains will be able to be excluded.

 Tax Breaks For Employee Benefits

 Mass Transit Benefit

 During 2013, the tax-free exclusion for the mass transit fringe benefits was $245 each month. The amount is reduced to $130 per month beginning in 2014.

 Above The Line Deductions

Deduction For Classroom Expenses

K through 12 educators, principals and teachers are able to deduct job-related expenses up to $250 as an above the line deduction. In 2014, they will only be able to deduct these expenses as part of the itemized deduction for employee business expenses.

Deduction for Tuition and Fees

This above the line deduction expires in 2013. In 2014, the American Opportunity Credit and Lifetime Learning Credit will be available.

Itemized Deductions

Mortgage Insurance Premium Deduction

Homeowners are able to deduct mortgage insurance premiums, only through 2013, as part of the mortgage interest deduction.

Local and State Sales Tax Deduction

State sales tax can be deducted in place of state income taxes. This is very valuable for taxpayers that live in any state that does not have a state income tax.

 Real Property Charitable Contributions Made For The Purpose of Conservation

Taxpayers that donate conversation easements to a charity can deduct the value of the easement limited to 50% of AGI minus deductions for all additional charitable contributions. The 50% special limitation expires in 2013.

 Tax Credits

Non-Business Energy Property Credit

The tax credit is for 10% of the cost of the qualified energy-efficient products that are installed at the main residence of the taxpayer.

2 Or 3 Wheeled Plug-In Electric Vehicles

This tax credit is for $2,500 for a vehicle that draws energy from a battery that has a minimum of five kilowatt capacity hours. There is an additional $417 credit for each additional kilowatt capacity hours in excess of the minimum five. The total of this credit has a limit of $7,500.

 Credit For Health Coverage

 The health coverage credit is equal to 72.5% qualified health insurance premiums and the taxpayer’s family.

Credit For Work Opportunity Tax Credit

This tax credit is an incentive for businesses to hire specific employees including public assistance recipients or veterans. For example, employers can receive a tax credit of $4,800 for each disabled veteran that is hired.



 Businesses are able to deduct up to 50% of new equipment costs through a bonus depreciation deduction in 2013. All of the rest of the cost of the equipment will be depreciated over the equipment’s useful life. This bonus will not be available in 2014. The only exception in 2014 will be in the case of noncommercial aircraft and long production period property.

Section 179

Under section 179, businesses are able to expense the total cost of equipment in the year it is purchased instead of using depreciation and spreading the cost over many years. In 2013, businesses are able to expense up to $500,000. In 2014, they will only be able to expense up to $25,000.