New Year's Eve this year won't be nearly as dramatic for tax policy as last year, but dozens of deductions — including a client favorite for charitable donations — are set to expire when the ball drops in December.
As of the beginning of the year, 57 so-called tax extenders will no longer exist, including federal tax deductions for individuals for state and local taxes and tax credits for businesses for research and development. Another provision that will bite the dust is one that allows tax-free distributions from individual retirement accounts for charitable contributions.
All the extenders can be applied to 2013 tax returns that are due April 15. But next year, the tax breaks won't be available unless Congress extends them once again in a process that has been repeated regularly to maintain the provisions.
The situation this time around is less urgent than it was during last year's fiscal cliff deliberations. At that time, the extenders hadn't been renewed for this year and weren't available for the tax-filing season until Congress extended them in the fiscal cliff legislation on Jan. 1.
Lawmakers renewed them retroactively for 2012 through this year.
Now questions are arising again about their availability for next year.
“Our major concern is the uncertainty of the tax code,” Jeff Porter, chairman of the tax executive committee of the American Institute of Certified Public Accountants, said during a media conference call Friday.
The group is pressing Congress to renew the tax extenders to help ease tax planning for companies and individuals.
“How can a business person make a decision to expand a business when they don't know what the state of the law is?" said Ed Karl, AICPA vice president for taxation.
The limbo surrounding IRA charitable contributions is already generating questions for Tim Steffen, senior vice president and director of financial planning at Robert W. Baird & Co. Inc.
“We continue to get a lot of clients asking about that,” he said.
“That has a lot of appeal,” Mr. Steffen said. “Taxpayers want to get whatever little edge they can get.”
It isn't clear when Congress will act on the tax extenders. Stand-alone legislation hasn't yet been proposed.
They might be included in bigger tax packages next year.
“These things, in all likelihood, will get extended,” Mr. Steffen said.