Thanks to the passage of the American Taxpayer Relief Act of 2012 (ATRA) in January 2013, several tax provisions were extended through 2013 that are of benefit to taxpayers filing 2013 returns this year. Here are six of them:
1. Mortgage Insurance Deductible as Qualified Interest
ATRA extended, through 2013 (and retroactive to 2012), a tax provision that expired in 2011 that allows taxpayers to deduct mortgage insurance premiums as qualified residence interest. As such, taxpayers can deduct, as qualified residence interest, mortgage insurance premiums paid or accrued before Jan. 1, 2014, subject to a phase-out based on the taxpayer’s AGI.
2. Limited Non-Business Energy Property Credits
Non-business energy credits expired in 2011, but were extended (retroactive to 2012) through 2013 by ATRA. For 2013 (as in 2011 and 2012), this credit generally equals 10 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $500 (down significantly from the $1,500 combined limit that applied for 2009 and 2010).
Because of the way the credit is figured however, in many cases, it may only be helpful to people who made energy-saving home improvements for the first time in 2013. That’s because homeowners must first subtract any non-business energy property credits claimed on their 2006, 2007, 2009, 2010, 2011, and 2012 returns before claiming this credit for 2013. In other words, if a taxpayer claimed a credit of $450 in 2012, the maximum credit that can be claimed in 2013 is $50 (for an aggregate of $500).
The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items do not.
3. State and Local Sales Taxes
ATRA also extended, through 2013, (and retroactive to 2012) the tax provision that allows taxpayers who itemize deductions the option to deduct state and local general sales and use taxes instead of state and local income taxes.
4. Simplified Home Office Deduction
Starting with their 2013 tax return, taxpayers who claim deductions for business use of a home (“the home office deduction”) now have another option. Taxpayers claiming the home office deduction are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.
Taxpayers claiming the optional deduction will complete a significantly simplified form. The new optional deduction is capped at $1,500 per year based on $5 per square foot for up to 300 square feet. Give us a call if you’d like more information on the simplified home office deduction for 2013.
5. Same-Sex Marriage
If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage.
If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. Please contact our office if you need to file an amended return or have any other questions.
6. Transportation “Fringe Benefits”
ATRA reinstated parity for transportation fringe benefits provided by employers for the benefit of their employees in 2013 (retroactive to 2012). As such, the monthly limit for qualified parking is $250 and the benefit for transportation in a commuter highway vehicle or a transit pass is $245 for tax year 2013.
If you have questions about these or other tax changes, please call us. We’d be happy to assist you.