IRS provides guidance for recognition of same-sex marriages
IRS recently ruled (Rev. Rul. 2013-17) that all legal same-sex marriages will be recognized for Federal Tax purposes. This applies to all taxes including: income, gift and estate taxes. That would include qualified retirement plans and other employee benefits. The determination is based on the status under the laws of the state where the marriage was established. This is the rule even if the state of their domicile does not recognize the marriage.
The ruling does not apply to registered domestic partnerships, civil unions or similar relationships recognized under state law that are not denominated as marriages. Currently Illinois has authorized civil unions but does not denominate them as marriages. Individuals that have had a civil union in Illinois are not considered married for Federal tax purposes.
The ruling was triggered by the recent decision of the Supreme Court in “United States v. Windsor”. That case ruled that a portion of the “Defense of Marriage Act “ (DOMA) relating to the definition of “marriage’ was unconstitutional.
Following are excerpts from the ruling:
“There are more than two hundred Code provisions and Treasury regulations relating to the internal revenue laws that include the terms ‘spouse’, ‘marriage’ …” husband and/or wife. “The Service concludes that gender-neutral terms in the Code that refer to marital status, such as ‘spouse’ and ‘marriage, ‘include, respectively, (1) an individual married to a person of the same sex if the couple is lawfully married under state law, and (2) such a marriage between “individuals of the same sex.”
“Given our increasingly mobile society, it is important to have a uniform rule of recognition that can be applied with certainty by the Service and taxpayers alike for all Federal tax purposes. Those overriding tax administration policy goals generally apply with equal force in the context of same-sex marriages.”
“For Federal tax purposes, the Service adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.”
“Except as provided below, affected taxpayers also may rely on this revenue ruling for the purpose of filing original returns, amended returns, adjusted returns, or claims for credit or refund for any overpayment of tax resulting from these holdings, provided the applicable limitations period for filing such claim under section 6511 has not expired. If an affected taxpayer files an original return, amended return, adjusted return, or claim for credit or refund in reliance on this revenue ruling, all items required to be reported on the return or claim that are affected by the marital status of the taxpayer must be adjusted to be consistent with the marital status reported on the return or claim.”
Taxpayers may rely (subject to the conditions in the preceding paragraph regarding the applicable limitations period and consistency within the return or claim) on this revenue ruling retroactively with respect to any employee benefit plan or arrangement or any benefit provided there under only for purposes of filing original returns, amended returns, adjusted returns, or claims for credit or refund of an overpayment of tax concerning employment tax and income tax with respect to employer-provided health coverage benefits or fringe benefits that were provided by the employer and are excludable from income under sections 106, 117(d), 119, 129, or 132 based on an individual’s marital status. For purposes of the preceding sentence, if an employee made a pre-tax salary-reduction election for health coverage under a section 125 cafeteria plan sponsored by an employer and also elected to provide health coverage for a same-sex spouse on an after-tax basis under a group health plan sponsored by that employer, an affected taxpayer may treat the amounts that were paid by the employee for the coverage of the same-sex spouse on an after-tax basis as pre-tax salary reduction amounts.”
IRS recognizes marriaged based on state of the ceremony
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DOMA RULING POTENTIAL TAX IMPACT
The Supreme Court’s Ruling in the Defense of Marriage Act (DOMA) Same-Sex Marriage Rights Case impact planning.
Background
On June 26, 2013, the U.S. Supreme Court ruled on a landmark case related to same-sex marriage (SSM) (United States v. Windsor). The 5-4 decision increases the federal tax (and non-tax) benefits available to married same-sex couples. The ruling affords same-sex couples, who are married and reside in a state which recognizes same-sex marriages, with the same federal rights and obligations (including tax benefits and rules) as heterosexual married couples. As discussed further at the end of this letter, there are many remaining issues that need to be clarified, including if and how the right to federal benefits will be protected when a couple marries in a state where same-sex marriage is legal, then moves to a state where the marriage is not recognized. For many of the possible impacts of this ruling mentioned below in this letter, it may depend on how the federal government interprets the decision and modifies the rules. The IRS is already working on clarifying guidance, so we expect to know more details in the coming months.
Same-sex couples who have not been legally married are unaffected by this ruling until their marital status is legally changed according to state or foreign country law.
The case has broad federal tax planning and compliance implications. This letter will provide:
- An overview of the Supreme Court’s decision and what it may mean for you;
- Considerations with respect to estate, retirement, income tax, and health and welfare benefits plans; and
- Actions to consider with respect to long term planning and tax return preparation.
Tax Implications
Tax benefits that may now be available to and issues facing legally married same-sex couples include:
- Joint filing of federal income tax returns
- Amending of prior tax returns
- Filing of protective refund claims
- Pre-tax basis of employer-provided health-care benefits
- Deductible and includable alimony
- Income tax-free transfers between spouses
- Lifetime gift tax-free property transfers to spouses
- Estate tax relief for surviving spouses
- Spousal IRA contributions, rollovers, required minimum distributions
Filing of Tax Returns
Following the decision, same-sex couples that the federal tax law now recognizes as married may have the option or even be required to use married filing joint or married filing separate filing status. Filing joint returns may also allow married same-sex couples to exclude up to $500,000 of gain from gross income on the sale of a principal residence, as opposed to $250,000 for unmarried individuals. Married same-sex couples with foreign assets may want to reconsider their foreign information reporting requirements as filing thresholds for a married couple are often lower than the combined filing thresholds for two unmarried individuals and constructive ownership rules apply to spouses.
Amending of Tax Returns
Consideration should be given to amending federal income tax returns and gift and estate tax returns (for years that are still open under the tax law’s statute of limitations) to change marital and filing status and other information that will alter the tax calculations and potentially result in a lower tax liability. State tax implications also should be reviewed. Returns may be amended to correct filing status, dependents, income, deductions, or tax credits. Couples may want to estimate the income tax liability that would have been due in previous years if the couple had been able file a joint return. Even basic items are impacted, such as standard deductions, child-related tax credits, and phase-outs of certain benefits, such as the education expense deduction. Another example of a tax change is where one spouse could have had capital losses on investments in prior years that the other spouse’s gains would offset if they could have filed joint federal returns. However, the “marriage penalty” could be applicable for some couples and the married filing joint or married filing separate filing status may result in a higher tax liability, especially high-earning couples where both spouses are working. Each situation will need to be reviewed carefully.
Amending returns most likely means that both spouses need to amend. It is likely that one spouse will owe taxes (and interest) and the other will receive a refund. Upcoming IRS guidance may indicate how these returns are to be filed, such as with some explanation or filed together. IRS guidance may indicate whether amended returns are required or optional.
Filing of Protective Refund Claims
If the right to a refund is contingent on future events (including issuance of guidance by the IRS) and is not determinable until after the time period for amending returns expires, a taxpayer can file a protective claim for refund. The claim is often based on current litigation (constitutionality); expected changes in tax law; changes in legislation, or regulations. A protective claim preserves the right to claim a refund when the contingency is resolved. Generally, the IRS allows taxpayers to amend returns for up to three years after the filing deadline or up to two years after the taxes are paid. Some couples may have more time if they filed protective claims for previous tax years that would give them an extension for amending returns. If the statute is soon expiring on an extended return or estate tax return, we should discuss immediately the possibility of filing a protective refund claim, even if the forthcoming IRS guidance is not yet issued.
Excludable Employer-Provided Fringe Benefits
Employer-provided fringe benefits used by the same-sex spouse of an employee should also be excludable from gross income. Now that taxes should no longer be a factor, some couples may want to re-evaluate their health insurance choices. One spouse may now be able to move onto the other’s more generous plan, which may also be more affordable.
Also, even if not changing health plans, some couples may be able to file an amended return to collect the taxes they may have paid on those benefits in previous years. Consideration should be given to claiming refunds of overpaid income and payroll taxes based on previous denial of tax-free extensions of employer-provided medical and dental benefits.
Adoption Credit
Some couples may want to consider any adoption tax credit and whether a change in federal filing status will have an impact on the credit.
Deductible and Includable Alimony
Married same-sex couples who later divorce should be able to take a deduction for alimony, which would be includable in the income of the recipient.
Income Tax-Free Transfers of Property Between Spouses
In addition, gain or loss should not be recognized on the transfer of property between same-sex spouses or between former spouses incident to a divorce.
Gift and Estate-Tax Free Transfers/Unlimited Marital Deduction
Married same-sex couples should be able to claim the unlimited marital deduction for federal estate and gift tax purposes, allowing a spouse to transfer an unrestricted amount of assets to his or her spouse at any time, including at the death of the transferor, free from gift and estate tax. The unlimited marital deduction is considered an estate preservation tool because assets can be distributed to surviving spouses without incurring estate or gift tax liabilities. Some couples that set up trusts to avoid double taxation on assets being passed along to their partners may find that a trust is no longer necessary now that assets can be passed directly to a spouse tax-free. Others may want to update their trusts to give their spouses tax-free access to the trust’s income or principal, an option this is now available to married same-sex couples.
In addition, married same-sex couples should be able to elect to split gifts in order to take advantage of a doubled annual gift tax exclusion ($14,000 for 2013, for a total tax-free gift of $28,000). The ruling could also make it possible for married same-sex couples to share assets without being subject to gift taxes. For example, prior to the ruling, couples that owned a house together but did not equally split mortgage payments and other expenses may have had those expenses covered by one spouse be subject to gift taxes if they exceeded $14,000 annually. Now that those marriages are recognized by the federal government, some married same-sex couples may feel more comfortable adding spouses name to the property title, knowing that they have more flexibility on how they choose to split those expenses and with no gift tax implications.
Portability of Unused Estate Tax Exemption Amount
The American Taxpayer Relief Act of 2012 extended permanently the concept of portability, which generally allows the estate of a surviving spouse to utilize the unused portion of the estate tax applicable exclusion amount ($5.1 million in 2012, and $5.25 million in 2013) of his or her last predeceased spouse. Now, the surviving spouse of a married same-sex couple should be able to take advantage of portability of the unused estate tax exemption amount of their deceased spouse.
Related Party Rules
Same- sex married couples who are now considered married for federal income and gift and estate purposes are subject to related party rules. This could impact the tax consequences of transactions between same-sex spouses. Prior to this ruling, married same-sex couples were treated for tax purposes as not related for certain transactions such as selling property between them and recognizing a loss. After this ruling, recognition of this same loss would not be allowed under the related party rules.
Spousal IRA Contributions, Rollovers, and Required Minimum Distribution
Married same-sex couples now have many more retirement plan options and issues to consider, including spousal IRAs, contributions, beneficiary designations, rollovers, and required minimum distribution (RMD) rules. Married ame-sex couples with the only beneficiary a spouse who is more than 10 years younger can now use the joint table rather than the “uniform table” for distributions. A surviving spouse can now consider whether to make a spousal rollover of a deceased spouse’s IRA or 401(k).
Other Federal Benefits
In addition, below are some of the federal benefits or protections that may now be available to legally married same-sex couples:
- Social Security, Medicare, and Medicaid benefits
- Certain veterans benefits, such as pensions and survivor’s benefits
- Military spousal benefits
- Family medical leave rights
- Spousal visas for foreign national spouses
- Private pension benefit options (e.g., survivor annuities)
- Application of the thresholds for the tax penalties and health insurance subsidies available under the Patient Protection and Affordable Care Act
Income and Estate and Gift Tax Planning Issues
Some of the specific individual income tax and estate and gift tax planning issues that may be impacted and should be considered are:
- Income Tax Planning Issues
- Joint tax returns
- Amended income tax returns
- Income tax returns beyond the statute of limitations
- Rollover IRAs at death
- Spousal IRA contributions and rollovers
- IRA required minimum distributions
- Divorce tax issues
- Application of the adoption tax credit
- Estate & Gift Tax Planning
- Updated estate plans and documents
- Inter vivos Gifts
- Amended gift tax returns
- Gift and estate tax returns beyond the statute of limitations
- Portability of unused applicable lifetime exemption
- Grantor trusts
- Spousal rollover
- Beneficiary designations
- Retirement plans
- Community property rules
- Marital Agreements
IRS Guidance Expected Soon
The Supreme Court’s DOMA ruling means that married same-sex couples are entitled to the same federal benefits as heterosexual couples, but it does not necessarily make financial planning and tax compliance for married same-sex couples less complicated. Even though federal benefits are immediately extended, it may take some time to fully implement the Supreme Court’s decision. Marriage is the “trigger” for more than 1,000 tax and benefit provisions in the Tax Code and other statutory provisions.
Federal government agencies, including the Treasury Department and Internal Revenue Service, will need to review and modify rules and regulations. Employers will need to review and revise their policies and procedures regarding benefits and withholding. Married same-sex couples will need to consider the new rules and policies, including their tax situation. Affected couples should consider updating their estate plans based upon the estate and gift tax impact, as well as their financial plans.
One tax issue to be addressed is the reality that at least 30 tax rules use the term “husband and wife” rather than married couple or spouses. Another issue to resolve is whether the federal tax law treats a couple as married based on the law of the state of celebration (where the marriage was performed) or the state of domicile (where the couple resides). The answers may not be the same for the federal tax law and Social Security law. This may be a matter that Congress may need to address rather than the IRS.
There may be some state tax issues to address as well. For example, federal employees may be entitled to certain benefits that others are not, and states likely will need to clarify what the state tax treatment is if the state does not recognize same-sex marriage. Also, if the federal tax law uses the state of celebration to determine if a married same-sex couple is married and the state of domicile does not respect that, the state will need to provide guidance on how to convert the federal joint return to separate state returns.
The day after the ruling, on June 27, 2013, IRS issued a statement that it will “move swiftly to provide revised guidance in the near future,” so we will keep you informed when such guidance is issued and what you should consider doing based on that guidance. We expect that various IRS publications and website information that provide guidance to married individuals will likely be revised.
It may take longer than expected for the IRS to respond. The IRS has been given increased responsabilities and the congressional budget process reduced their funding. With reduced staff and training any resources they devote to these matter will reduce their ability to administer the tax laws that Congress has passed.
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There’s Still Time to Contribute to an IRA for 2012
There’s still time to make a regular IRA contribution for 2012! You have until your tax return due date (not including extensions) to contribute up to $5,000 for 2012 ($6,000 if you were age 50 by December 31, 2012). For most taxpayers, the contribution deadline for 2012 is April 15, 2013.
You can contribute to a traditional IRA, a Roth IRA, or both, as long as your total contributions don’t exceed the annual limit. You may also be able to contribute to an IRA for your spouse for 2012, even if your spouse didn’t have any 2012 income.
Traditional IRA
You can contribute to a traditional IRA for 2012 if you had taxable compensation and you were not age 70½ by December 31, 2012. However, if you or your spouse was covered by an employer-sponsored retirement plan in 2012, then your ability to deduct your contributions may be limited or eliminated depending on your filing status and your modified adjusted gross income (MAGI) (see table below). Even if you can’t deduct your traditional IRA contribution, you can always make nondeductible (after-tax) contributions to a traditional IRA, regardless of your income level. However, in most cases, if you’re eligible, you’ll be better off contributing to a Roth IRA instead of making nondeductible contributions to a traditional IRA.
2012 income phaseout ranges for determining deductibility of traditional IRA contributions:
1. Covered by an employer-sponsored plan and filing as:
a. Your IRA deduction is reduced if your MAGI is:
Single/Head of household: $58,000 to $68,000
Married filing jointly: $92,000 to $112,000
Married filing separately: $0 to $10,000
b. Your IRA deduction is eliminated if your MAGI is:
Single/Head of household: $68,000 or more
Married filing jointly$112,000 or more
Married filing separately: $10,000 or more
2. Not covered by an employer-sponsored retirement plan, but filing joint return with a spouse who is covered by a plan
a. Your IRA deduction is reduced if your MAGI is: $173,000 to $183,000
b. Your IRA deduction is eliminated if your MAGI is: $183,000 or more
Roth IRA
You can contribute to a Roth IRA if your MAGI is within certain dollar limits (even if you’re 70½ or older).
For 2012, if you file your federal tax return as single or head of household, you can make a full Roth contribution if your income is $110,000 or less. Your maximum contribution is phased out if your income is between $110,000 and $125,000, and you can’t contribute at all if your income is $125,000 or more.
Similarly, if you’re married and file a joint federal tax return, you can make a full Roth contribution if your income is $173,000 or less. Your contribution is phased out if your income is between $173,000 and $183,000, and you can’t contribute at all if your income is $183,000 or more. And if you’re married filing separately, your contribution phases out with any income over $0, and you can’t contribute at all if your income is $10,000 or more.
Even if you can’t make an annual contribution to a Roth IRA because of the income limits, there’s an easy workaround. If you haven’t yet reached age 70½, you can simply make a nondeductible contribution to a traditional IRA, and then immediately convert that traditional IRA to a Roth IRA. Keep in mind, however, that you’ll need to aggregate all traditional IRAs and SEP/SIMPLE IRAs you own–other than IRAs you’ve inherited–when you calculate the taxable portion of your conversion.
Finally, keep in mind that if you make a contribution to a Roth IRA for 2012–no matter how small–by your tax return due date, and this is your first Roth IRA contribution, your five-year holding period for identifying qualified distributions from all your Roth IRAs (other than inherited accounts) will start on January 1, 2012.
A financial plan is essential for you to know how to invest your money.
To over simplify, financial planning is how you manage your finances and establish a path to reaching your goals. Investment management is one part of managing your finances. It is the part that determines how your savings will be invested.
Financial planning starts with your goals. The amount and timing are critical. Prioritizing your financial goals is necessary. You can assign a priority of 1 to 10 or categorize your goals by what is needed, what is wanted and what is wished for. This will be essential as you monitor your progress. Life and unanticipated events are not controllable and may require adjustments. Adjustments may result in changes to your goals, the timing of your goals, or your spending.
A reserve fund is needed to absorb unexpected events. Reserves should be held so that they are quickly assessable, that is, liquid. Six months of reserve are generally recommended. As you approach each goal, the reserve fund should be increased. This will avoid the impact of fluctuating investment values when the funds are needed. The amount of liquid assets should be increased as you near retirement. This minimizes the need to sell investments when the market is depressed. Two years of liquid funds are generally recommended for retirees. A portion of the funds for living expenses in retirement might be held in short-term bond funds or bonds.
Investments are purchased with the amount of your savings that exceed your reserves. The amount that is used for investments must be sufficient to reach your goals. Education expenses and health care are two categories of expenses that have exceeded what people anticipated. Many people underestimate the amount they will need in retirement. Because life expectancy has increased and people have retired early, many people will not be able meet their retirement goals.
The planning process needs to consider the above events and your ability to withstand losses.
The above has touched on cash planning, investment planning, education planning, risk assessment and retirement planning. All the planning areas need to fit together. How you manage your investments is dependent on the other areas of your financial plan.
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IRS announced a simplified method to claim a Home Office Deduction, starting in 2013
A new optional deduction will reduce the paperwork and recordkeeping burden on small businesses. The deduction is based on $5 a square foot for up to 300 square feet.
Current restrictions on the home office deduction still apply. That includes the requirement to use the home office regularly and exclusively for business and the limit to the income from the business.
This method eliminates the need to file form 8829. A new simplified form will be provided to claim the home office deduction under the new rule.
The deduction for depreciation of the portion of the home used in a trade or business will not be permitted if
the simplified option is used. Allowable mortgage interest, real estate tax and casualty losses on the home can
be claimed as itemized deduction on Schedule A. these deductions need not be allocated between personal
and business use.
Business expenses unrelated to the home such as advertising, supplies and wages paid to employees will still be fully deductible.
READ MORE: http://tinyurl.com/bxa5vce
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New rules for 401(k), 403(b), and 457(b) in-plan Roth conversions in the American Taxpayer Relief Act of 2012
The American Taxpayer Relief Act of 2012 (ATRA), enacted to avoid the fiscal cliff, includes a provision that may be important to certain retirement plan participants. ATRA makes it easier to make Roth conversions inside your 401(k) plan (if your plan permits).
A 401(k) in-plan Roth conversion (also called an “in-plan Roth rollover”) allows you to transfer the non-Roth portion of your 401(k) plan account (for example, your pretax contributions and company match) into a designated Roth account within the same plan. You’ll have to pay federal income tax now on the amount you convert, but qualified distributions from your Roth account in the future will be entirely income tax free. Also, the 10% early distribution penalty generally doesn’t apply to amounts you convert.
While in-plan conversions have been around since 2010, they haven’t been widely used, because they were available only if you were otherwise entitled to a distribution from your plan–for example, upon terminating employment, turning 59½, becoming disabled, or in other limited circumstances.
ATRA has eliminated the requirement that you be eligible for a distribution from the plan in order to make an in-plan conversion. Beginning in 2013, if your plan permits, you can convert any part of your traditional 401(k) plan account into a designated Roth account. The new law also applies to 403(b) and 457(b) plans that allow Roth contributions.
This provision will not be beneficial to all participates of plans the permit an in-plan Roth conversion. There are many factors to consider in deciding if it could be beneficial to you. Be sure to evaluate your current and future tax situation when making the decision.
The American Taxpayer Relief Act of 2012
The new year began with some political drama, as last-minute negotiations attempted to avert sending the nation over the “fiscal cliff.” Technically, we actually did go over the cliff, however briefly, as a host of tax provisions and automatic spending cuts took effect at the stroke of midnight on December 31, 2012. However, January 1, 2013, saw legislation–retroactively effective–pass the U.S. Senate, and then later the House of Representatives. The American Taxpayer Relief Act of 2012 (ATRA) permanently extends a number of major tax provisions and temporarily extends many others. Here are the basics.
Tax rates
For most individuals, the legislation permanently extends the lower federal income tax rates that have existed for the last decade. That means most taxpayers will continue to pay tax according to the same six tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) that applied for 2012. The top federal income tax rate, however, will increase to 39.6% beginning in 2013 for individuals with income that exceeds $400,000 ($450,000 for married couples filing joint returns).
Generally, lower tax rates that applied to long-term capital gain and qualifying dividends have been permanently extended for most individuals as well. If you’re in the 10% or 15% marginal income tax bracket, a special 0% rate generally applies. If you are in the 25%, 28%, 33%, or 35% tax brackets, a 15% maximum rate will generally apply. Beginning in 2013, however, those who pay tax at the higher 39.6% federal income tax rate (i.e., individuals with income that exceeds $400,000, or married couples filing jointly with income that exceeds $450,000) will be subject to a maximum rate of 20% for long-term capital gain and qualifying dividends.
Alternative minimum tax (AMT)
The AMT is essentially a parallel federal income tax system with its own rates and rules. The last temporary AMT “patch” expired at the end of 2011, threatening to dramatically increase the number of individuals subject to the AMT for 2012. The American Taxpayer Relief Act permanently extends AMT relief, retroactively increasing the AMT exemption amounts for 2012, and providing that the exemption amounts will be indexed for inflation in future years. The Act also permanently extends provisions that allowed nonrefundable personal income tax credits to be used to offset AMT liability.
2012 AMT Exemption Amounts
Before Act
After Act
Married filing jointly
$45,000
$78,750
Unmarried individuals
$33,750
$50,600
Married filing separately
$22,500
$39,375
Estate tax
The Act makes permanent the $5 million exemption amounts (indexed for inflation) for the estate tax, the gift tax, and the generation-skipping transfer tax–the same exemptions that were in effect for 2011 and 2012. The top tax rate, however, is increased to 40% (up from 35%) beginning in 2013.
The Act also permanently extends the “portability” provision in effect for 2011 and 2012 that allows the executor of a deceased individual’s estate to transfer any unused exemption amount to the individual’s surviving spouse.
Phaseout or limitation of itemized deductions and personal exemptions
In the past, itemized deductions and personal and dependency exemptions were phased out or limited for high-income individuals. Since 2010, neither itemized deductions nor personal and dependency exemptions have been subject to phaseout or limitation based on income, but those provisions expired at the end of 2012.
The new legislation provides that, beginning in 2013, personal and dependency exemptions will be phased out for those with incomes exceeding specified income thresholds. Similarly, itemized deductions will be limited. For both the personal and dependency exemptions phaseout and the itemized deduction limitation, the threshold is $250,000 for single individuals ($300,000 for married individuals filing joint federal income tax returns).
Other expiring or expired provisions made permanent
“Marriage penalty” relief in the form of an increased standard deduction amount for married couples and expanded 15% federal income tax bracket.
Expanded tax credit provisions relating to the dependent care tax credit, the adoption tax credit, and the child tax credit.
Higher limits and more generous rules of application relating to certain education provisions, including Coverdell education savings accounts, employer-provided education assistance, and the student loan interest deduction.
Temporary extensions
Provisions relating to increased earned income tax credit amounts for families with three or more children are extended through 2017.
American Opportunity credit provisions relating to maximum credit amount, refundability, and phaseout limits are extended through 2017.
The $250 above-the-line tax deduction for educator classroom expenses, the limited ability to deduct mortgage insurance premiums as qualified residence interest, the ability to deduct state and local sales tax in lieu of the itemized deduction for state and local income tax, and the deduction for qualified higher education expenses are all extended through 2013.
Charitable IRA distributions (IRA holders over age 70½ are able to exclude from income up to $100,000 in qualified distributions made to charitable organizations) are extended through 2013; special rules apply for the 2012 tax year.
Exclusion of qualified mortgage debt forgiveness from income provisions extended through 2013.
Exclusion of 100% of the capital gain from the sale of qualified small business stock extended to apply to stock acquired before January 1, 2014.
50% bonus depreciation and expanded Section 179 expense limits extended through 2013.
The above summary provides an outline of key provisions. Congress and or the IRS will provide clarifiication and additional details in the future.
