Several valuable tax breaks -- called “tax extenders” -- expire at the end of the year unless Congress acts. And while it’s been something of a given in past years that our elected officials won’t let these things lapse, this year may be different. After all, who would have thought the federal government would shut down for two weeks over political wrangling? Here ar...e some of the tax breaks that will expire at the end of 2013 unless Congress acts.
Tuition and Fees Deduction: Also known as the “Torricelli Deduction,” it allows many taxpayers to deduct up to $4,000 in tuition and expenses from taxable income. (There is a phase-out for higher income taxpayers.) One strategy: if you haven’t already spent the maximum amount allowed for your tax bracket this year and you plan to take courses in the first quarter of 2014, prepay them now.
Teacher Education Deduction: Teachers can typically deduct up to $250 of money spent for supplies for their classroom. Educators who are eligible for this deduction and haven’t already spent $250 this year may want to purchase the supplies they need for the next quarter or semester before the end of the year.
State and Local Sales Tax Deduction: Taxpayers currently have the choice of either deducting state income taxes or sales tax paid during the year, but the option to deduct sales and local taxes on purchases option will expire at the end of 2013 unless Congress extends it. “This one is huge for people who don’t pay state income taxes, like in Florida,”
If you live in a state where there is no state or local income taxes and are planning a major purchase - car, boat, home renovation, etc. -- you may want to squeeze it in by year end to take advantage of this deduction. (You may also come out ahead by deducting sales tax if your state or local income taxes are low.)
You’ll find a sales tax calculator on the IRS website. This is the provision that allows many homeowners who have sold their home through a short sale or lost it through foreclosure to avoid paying taxes on the forgiven debt. It’s a big deal, as it can often allow former homeowners to exclude tens, even hundreds, of thousands of dollars in canceled debt from their taxable income. Last year Congress extended it, but only through the end of 2013. If you are currently trying to complete a short sale, you may want to push as hard as you can to complete it by the end of the year.