3 Tax Breaks That Will Save You Money on Your 2014 Return
A slew of individual, business and energy tax breaks were set to expire at the end of 2014, but last-minute action by Congress and the president allowed for a one-year extension. The Tax Increase Prevention Act became official on December 19, 2014, giving businesses reason to celebrate extension of the research and development (R&D) credit and first-year bonus depreciation. Individual taxpayers will also enjoy more money in their pocket on April 15 with the following tax breaks.
- Deduction for private mortgage insurance. When you purchase a home and put less than 20% down, you must pay private mortgage insurance (PMI). Since 2007, homeowners who meet certain income limits have been able to deduct PMI paid on primary residences, and this incentive has been extended for another year. It’s a bonus for many homeowners, giving them the ability to deduct not only the interest they are paying on a mortgage, but also the PMI.
- Deduction of sales tax for no-income-tax states. The bill also extended a benefit for those living in states without income taxes, including Texas. State income tax is deductible on a federal tax return, but Texans may instead take a deduction for state and local general sales taxes paid in 2014. This deduction is beneficial for large purchases, such as a vehicle, and varies based on your residence and adjusted gross income. You’ll need to show receipts for the purchases you made.
- No income tax on cancelled mortgage debt. Normally people have to pay income taxes on forgiven debt. Those who lost their homes to foreclosure or did a short sale in 2014 can breathe easier knowing that they may be able to avoid a huge tax bill when they file their tax returns. The extension excludes up to $2 million of debt forgiven on a mortgage on a primary residence from gross income.
It is uncertain if these laws, which expired on December 31, 2014, will be extended for 2015.
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