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Grab these tax breaks while you still can

If you rely on these tax breaks, which are set to expire at the end of the year, you might want to start planning for April 15, 2015 earlier than usual.

By Money Staff Mar 20, 2014 12:36PM

This post comes from Amy Feldman at partner site Reuters.


As you go to do your taxes this year, it may be the last time you get to take advantage of dozens of tax provisions that expired at the end of 2013.


So grab them while you can. And be prepared for some tax-planning difficulties this year if you've come to rely on one of the big ones.


A total of 55 so-called "tax extenders", little bits of the tax code that either fall by the wayside or get automatically renewed, expired at year-end.

These last-time deals include popular tax breaks like the choice to deduct state and local sales taxes for those in states with low or no income tax, and the special mortgage debt cancellation writeoff for underwater homeowners.


They're still in place for your 2013 tax returns, so there's no need to panic for this year. But they're in flux for 2014.


Sen. Ron Wyden, D-Ore., the new chairman of the Senate Finance Committee, has said he wants to focus on them as early as next month.


But while you're waiting for Washington to decide whether to reinstate some or all of them retroactively, you can't put off your own taxes and tax planning.


Here are details on four of the most important for individuals. Take them while you still can.


1. State and local sales taxes

This provision let taxpayers choose between deducting state income taxes, which is a no-brainer in high-tax states like New York, and state sales taxes, which is a much-better deal in states that don't collect income taxes like Florida.


It's a particularly big deal for those who bought big-ticket items like boats or cars last year.

In 2011, 10.9 million taxpayers deducted state sales taxes, representing nearly one-quarter of all the returns that claimed state and local taxes, according to Internal Revenue Service data.

While this tax break has had a reprieve before, the uncertainty is problematic for taxpayers who have previously relied on it and have to file estimated taxes.


That's because the first-quarter payment date (also April 15) is approaching, and the calculation could vary widely depending on whether this gets reinstated or not.


If you're in that position, you'll need to decide between potentially overpaying your estimated taxes (less than ideal) or underpaying them (risky, given the potential penalties).


2. Educator writeoff

It's a relatively small-potatoes deduction, just $250 per individual for unreimbursed educator expenses, but for cash-strapped teachers who often spend out-of-pocket on their students, it's a nice little bonus.


Income tax numbers at the accountantIn 2011, some 3.8 million educators deducted $962 million in school expenses, according to IRS data.


For now, if you're an educator - and the term, for tax purposes, includes teachers, principals, instructors, school aides and anyone else who spends at least 900 hours a year on education - you can claim the deduction on your 2013 taxes.


A bonus while it remains in effect: You can claim it even if you don't itemize your deductions.


3. Special tax break for the cancellation of mortgage debt

It may come as a surprise to those who aren't tax geeks, but the tax code treats forgiven debts as taxable income.


A special provision, put in place in 2007, allows struggling homeowners to exclude up to $2 million in canceled debt on their principal residence from income.


Those who negotiated principal reductions with their banks, faced down foreclosure, or did short sales last year can still take advantage of this tax break when they do their 2013 taxes.

But unless it's renewed, homeowners now struggling to find a way out from under their debt may face a tax bill of thousands of dollars more than they would have had they done a loan modification last year.


While the number of homeowners who are underwater on their mortgages has been declining, more than 6 million still are, according to CoreLogic, a residential property research firm.


4. Rollover of IRA distribution to charity

Since 2006, a popular rule has permitted those aged 70-and-a-half and older to donate up to $100,000 from their individual retirement accounts (IRAs) to charity without paying tax.


The charitable rollover could count toward their required minimum distribution (RMD), but it wasn't taxed like a regular distribution (nor could those who took advantage of it claim the charitable deduction).


For retirees who didn't need the money from their RMDs for living expenses, the charitable rollover was a better deal than paying taxes on the distribution and then donating it to charity.


If you did it last year, congratulations!


Claim it on this year's return. For 2014's tax planning, the best advice is to wait on both taking RMDs and making charitable contributions until there's more clarity from Washington.

"We're advising clients to hold off," says Craig Richards, director of tax services at Fiduciary Trust. "It's big bucks."


More from Reuters

VIDEO ON MSN MONEY

90Comments
Mar 20, 2014 2:42PM
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We NEED a FLAT TAX .. No Tax's for the first $30,000 then a flat 10% for everything above.
Mar 20, 2014 4:11PM
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Does this affect the poor? No. Does this affect the rich? No. who does it affect? Wait for it.....the middle class! Yea!

Good to see the folks in Washington looking out for us chumps.

Mar 20, 2014 1:32PM
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Just more ways that politicians are able to manipulate the tax code to curry favor with their voting blocks.  Why have a tax code where only certain people can take advantage of certain portions. Why not equal treatment under the law, so that everyone contributes equally to pay for the services that this country provides and everyone can take advantage of those services equally as well? 
Mar 20, 2014 2:08PM
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You can bet if more Demoncrats get into office at mid=term elections, you can count on getting squeezed more for tax dollars. THINK PEOPLE!

Mar 20, 2014 6:53PM
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BARACK OBAMA making welfare cool since 2008
Mar 21, 2014 9:27AM
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There will come a day when there will be no more tax breaks or tax deductions left to file for and no more tax refunds. The government will take all of it as it gets deeper and deeper into debt. The deficient will continue to grow higher and higher into the quadrillions if we allow the government to run a mock. Think about this, which party spends more on entitlement programs and which party tries to cut unnecessary pork or special interest type programs? Then you will know what our children and grandchildren and great-grandchildren will be stuck paying for in the future. Please go to the polls on November 2014 and make the BIG CHANGE!!! God, please save our country!!
Mar 20, 2014 1:26PM
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You should see all the travel expenses we get to write off,  traveling from Galaxy to Galaxy.
Mar 21, 2014 11:07AM
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Why should I have to subsidize someone's real-estate investment that lost money. I'm sure there's more than one liberal handout or wealthy special break that does the same thing and they too are all wrong. When you buy a home or anything else, it's your baby win or loose. I've speculated on homes and other real-estate ventures over the years and sink or profit, it has always been my gamble, it's called Capitalism. The last I heard these folks are no better than me or my parents and this notion that tax payers owe these people something  is plane wrong. These breaks should not only be eliminated, they should never have happened in the first place.
Mar 20, 2014 4:33PM
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Politicians have already taken the good ones and wasted the money by giving it to foreign countries for consumption or whatever....mostly for buying them guns so they can kill each other, all this while they try to take our guns away.....Wonder Why?  :)  
Mar 20, 2014 4:09PM
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It's obvious that the current tax code is a result of the convoluted attempts of Democrats to rig the system by making as many exemptions as possible for various special interest groups in their quest to achieve "equality".
Mar 20, 2014 2:49PM
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I usually dont pay  taxes / but when i do pay  taxes / I use other people's money/ Stay wealthy my friend.......... Who Am I?
Mar 21, 2014 9:34AM
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no suprize with obama in office.  higher taxes  less tax deductions. im amazed the people have any money left.  we need a new tax system , and it has come time we make them listen not let them run our lives.
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Grab these loop holes while you can!
Mar 21, 2014 3:52AM
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Higher taxes coming to a DemoRat state near you...
The government wants to own you just a little more...
They've got interest on 17 trillion to pay and current revenues ain't cutting it...

Mar 20, 2014 2:27PM
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A farmer I knew wrote off his new tennis court as a "barn floor".
Apr 1, 2014 5:49PM
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What about responsible homeowners like myself? The value of my home is 30% less than when I bought it in 2005 at the height of the market. I put almost 50% down in cash. I'm out MY money! Can I get my money back? Nope.
Mar 20, 2014 9:31PM
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Hope for some pocket change - somebody's gotta pay for Barry's debt, and it's not the white liberal elite

Mar 20, 2014 1:45PM
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Yeah, , , well - it does not matter anymore.  This is an "ancient battle" only the govt seems to make advances in.  Eventually we will be taxed for the air we breathe, , , and perhaps we should be already in order to start clean-up work on all the air pollution.  Colorado will certainly need one because of all the POT smokers!
Apr 1, 2014 4:40PM
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IS IT TRUE THAT THE USA BELONGS TO CHINA NOW???
Mar 20, 2014 3:48PM
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Keep the O'Rectalthermometer and his party in power and you can ALL count on much higher taxes. Now, let's all break into a rousing rendition of " Mammies little baby loves shortnin bread."
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