Expiring tax provisions, and steps to take before the end of 2013, Part II
In my last blog, I discussed three tax provisions that expire at the end of 2013, and some ideas about what you should do now. Here are three more tax provisions that are set to expire soon.
Energy credits. Have you been hankering for one of those new plug-in vehicles? If you buy an electric drive motorcycle or a three wheel plug-in vehicle, you can get a credit for up to $7,500. But you’d better act fast, since this credit is set to expire at the end of the year.
The choice of such vehicles is sparse, but there are many of these vehicles still on the drawing board and set to still be manufactured beginning in 2014, so I’m guessing that this expiring energy credit may be renewed or re-enacted at some point. But if you want to be sure you get the credit, move fast and drive away in the vehicle by December 31.
There are also energy credits available for 10% of the cost, up to a $500 credit limit, for installing insulation or energy-efficient windows, water heaters, doors and roofs in your home or for improved efficient heating and cooling systems. But these improvements need to be in place by the end of the year, so you’d better get moving if you want to take advantage of these expiring tax credits.
Home mortgage debt relief. During the housing downturn, taxpayers who owed more than their homes were worth and lost their homes in foreclosure or short sale weren’t required to pay tax on the mortgage debt that exceeded the value of the home. But beginning in 2014, if you are relieved of debt in a mortgage modification, short sale or foreclosure, it could once again result in taxable income.
If you are in the process of modifying your mortgage or short-selling your home, try to get the transaction completed before the end of the year to take advantage of current rules. If your home is in foreclosure, you may want to talk to the mortgage company about deeding the property back to them before year-end, if that seems like your best option.
Business property acquisition. When you buy equipment to be used in your business, you are able to expense the cost of the equipment in the year you buy it or to deduct 50% of the cost as bonus depreciation. Both those deductions will be curtailed at the end of 2013.
Unless Congress acts to extend them, in 2014 there will be no bonus depreciation and the expensing provisions will be reduced from the current $500,000 to only $25,000 of property eligible for write-off in the year of acquisition. So if you are planning to buy large amounts of business property soon, buying it before the end of the year may save you taxes.