The U.S. Congress, in its wisdom, waited until the waning weeks of the year to approve some tax breaks that will only be good for 2014.
That means that in some cases, you lost out: it is too late to take advantage of them and you are going to lose them at the end of the year.
But there are a handful of provisions that may benefit some taxpayers who have special situations and can act quickly to lock in their breaks, once President Barack Obama signs the tax extenders bill as he is expected to do soon.
Give away part of your IRA. There is a special situation for people who face mandatory minimum distributions from their retirement accounts, but do not itemize their tax deductions, and as a result, can’t write off charitable contributions. They can avoid taxes on their IRA distribution by transferring it directly to a charity, suggests Greg Rosica, a partner with Ernst & Young.
This provision expires on Dec. 31, however, and it is unclear whether it will be renewed next year. Taxpayers in high tax brackets who do not itemize may want to transfer more than the minimum to get money out of their IRA and cover gifts they would otherwise make in subsequent years: under this rule, you can transfer as much as $100,000. So contact your favorite charity and make sure they can effect the rollover before year-end.
Buy your boat. Congress also extended, just through the end of 2014, the provision that allows taxpayers to deduct their state sales taxes from their taxable income instead of deducting their state income taxes. In places like Florida where there is no state income tax, that is a benefit that can be worth a lot. If you’ve had your finger on the “buy” button for a new boat, car, or other expensive item, you might save significantly by buying it this year, says Rosica, one of the authors of the voluminous EY Tax Guide 2015.
Make a tuition payment. Even people who do not itemize deductions are allowed to write off up to $4,000 in tuition and education expenses if their income falls under certain levels. You may have already spent that much on qualified education costs this year. But if you have not—and you expect to be ponying up for spring semester—make that payment before 2014 ends.
Talk to your human resources department about that commuting benefit. For almost all of 2014, employers operated under the clearly inequitable (and environmentally unfriendly) rule that people who used mass transit could set aside pre-tax income of up to $130 a month for commuting costs, but those who drove to work could set aside $250 a month for parking. Now Congress has equalized those two benefits at $250 per month for all of 2014—but this year alone.
For many workers at large companies, it is too late to get an additional $1,440 taken out of their pay for commuting costs this year. That’s too bad, because it could save some people more than $600 in state, federal and Social Security taxes. If you have a more flexible HR department, go ask for a make-up withdrawal. You could always load your farecard for next year when Congress may go through this exercise again.