It’s Halloween which means tax season is just around the corner. Between the holidays and family time, very few people have taxes on their mind. However, this is the best time to get ready for the upcoming tax season. The IRS has already released a 1040 draft form and there are a few changes that may affect multiple individuals.
One tax change is the educator expenses deduction. This deduction was utilized by educators to get an above the line deduction for supplies they paid out of pocket for their students. This was a direct reduction of adjusted gross income (AGI) for $250. This deduction is most likely going to expire which means the only way to receive a benefit is through itemizing. You can list unreimbursed employee expenses on your schedule A, but you have to be itemizing. Those expenses are subject to the 2% AGI limitation.
Another tax change is the tuition and fees deduction. This deduction is also set to expire which means if you have already exhausted or do not meet the qualifications for the American opportunity tax credit (which is fairly restrictive), the only other higher education credit is the lifetime learning credit. The lifetime learning credit has lower AGI limits and allows for a lower deduction. The tuition and fees deduction was another above the line deduction (direct reduction of AGI) and the lifetime credit is a reduction of tax owed and not refundable.
The energy efficiency credit expired at the end of 2013 thus it will no longer be available.
These changes, as well as others, are items to discuss with your CPA now so they can advise you in other tax saving opportunities. Instead of waiting until the last minute and getting an extension and dragging the process out until the next holiday season, you will be ready to have your taxes taken care of.
posted by Emma Rose Smith
