This article originally appeared as a column for the Cleveland Jewish News.
Even though only a few weeks remain on the calendar, it’s not too late for a little planning to make the most of some tax breaks scheduled to expire at the end of 2013. Of course, Congress may extend some or all of these (assuming the government remains open). But, according to CCH, a Wolters Kluwer subsidiary and provider of tax, accounting and audit information, software and services, that’s not at all clear, and Congress is most likely to be very budget-conscious when considering tax law changes.
Given the uncertainty, if you were already planning to, say, make your home more energy-efficient, buy an electric car or look for some debt relief through a short sale, it makes good sense (and cents) to do it sooner than later so you don’t miss out on benefits.
Here is a list of some expiring tax provisions to think about before your ring in the new year.
• Teachers who purchase any or all of their own supplies should consider stocking up now. Primary and secondary education professionals can get an above-the-line deduction of up to $250 for unreimbursed expenses paid during the year.
• Cancellation of mortgage debt from, say, a short sale or a foreclosure of a primary residence can be excluded from income. That is, you won’t have to pay federal income tax on this “free money.” And the limit on this income exclusion is a staggering $2 million.
• Energy-efficient remodeling, including better insulation, new doors and windows, or an updated HVAC system can qualify for a tax break of up to $500.
• Purchase of two- and three-wheeled electric motor vehicles will qualify you for a deduction of 10 percent of the purchase price up to $2,500. The credit for automobiles and light trucks can reach a whopping $7,500. While this credit does not, per se, expire at the end of the year, it does begin to phase out for specific manufacturers as sales of qualifying vehicles for use in the United States reach 200,000. In this case, being an early adopter of new technology pays – literally.
• If you typically deduct state and local sales tax in lieu of state/local income tax, consider making big purchases now. The ability to select this deduction is slated to expire this year. Note, though, that CCH considers this tax code provision one of the most likely candidates for extension.
• Charitable individuals age 70½ or older can make annual distributions of up to $100,000, tax-free, as an alternative to taking the itemized deduction on a charitable gift.
• Finally, environmentally minded individuals can maximize their donation opportunities through the enhanced tax benefits available for contributing real property for conservation purposes.
*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.