American Taxpayer Relief Act Has Extenders
This article highlights some interesting parts of the recent legislation. We hope the commentary below
is helpful and easy-to-understand.
Individual Tax Provisions
Exclusion Of Cancellation Of Indebtedness On Principal Residence- Cancellation of indebtedness income
is includible in income, unless a particular exclusion applies. This provision excludes from income
cancellation of mortgage debt on a principal residence of up $2 million. The American Taxpayer Relief
Act extends the provision for one year, through 2013.
Mortgage Insurance Premiums-This provision treats mortgage insurance premiums as deductible
interest that is qualified residence interest. The American Taxpayer Relief Act extends this provision
through December 31, 2013. The provision originally expired after 2011. This provision provides an
additional itemized deduction by treating mortgage insurance premiums as deductible qualified
residence interest.
Business Tax Provisions
There are some popular but temporary tax extenders relating to businesses included in the American
Taxpayer Relief Act. Among them are Code Sec. 179 small business expensing and bonus depreciation.
Code Sec. 179 Small Business Expensing- The Act extends through 2013 enhanced Code Sec. 179 small
business expensing. The Code Sec. 179 dollar limit for tax years 2012 and 2013 is $500,000 with a $2
million investment limit. Without the American Taxpayer Relief Act, the Code Sec. 179 dollar
dollar limit for tax years beginning in 2012 would have been $125,000 (subject to inflation adjustment)
with a $500,000 investment limit (again, subject to inflation adjustment).
Bonus Depreciation- The Act extends 50 percent bonus depreciation through 2013. Some
transportation and longer period production property is eligible for 50 percent bonus depreciation
through 2014.
Bonus depreciation has been used as an economic stimulus in many tax bills in recent years. One
Hundred percent bonus depreciation generally expired at the end of 2011.
To be eligible for bonus depreciation, qualified property must be “Brand New” or “First Use”
The information in this article is for general information purposes. This does not constitute legal, accounting, tax or other professional advice or services and is presented without any representation or warranty.
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