Congress has approved the Tax Increase Prevention Act of 2014 (HR 5771). The new law extends so-called “tax extenders” retroactively for one year (through 2014). It also includes the Achieving a Better Life Experience (ABLE) Act, creating tax-favored savings accounts for individuals with disabilities along with some tax-related offsets. Before adjourning, Congress also approved an Omnibus Spending Agreement for fiscal year (FY) 2015, which cuts funding for the IRS. President Obama has indicated that he will sign both the Omnibus Agreement and HR 5771bills as soon as they reach his desk.
The one-year retroactive extension of the tax extenders effectively allows taxpayers to claim the popular but temporary incentives on their 2014 returns filed in 2015. Without this, individuals would be unable to claim, for example, the state and local sales tax deduction, higher education tuition deduction, and the exclusion for discharge of mortgage debt. Business and energy incentives, most notably the research tax credit, bonus depreciation and the production tax credit, would otherwise be unavailable.