In mid-December, Congress finally acted on tax breaks that had expired at the end of 2013. The bill renewed deductions, credits and exclusions that taxpayers have come to rely on, but it is a good news/bad news law: The tax extenders were renewed for all of 2014 -- retroactive to Jan. 1 -- but no further. The slate was wiped clean once again as the 113th Congress handed the debate over to the 114th.
Don't worry if some of the provisions sound familiar: You have seen them before. In fact, you may have seen them here before. We discussed the mortgage debt forgiveness exclusion, for example, toward the end of 2013 -- and, come to think of it, toward the end of 2012, as well. The more things change, the more they stay the same.
If it is any comfort, the frustration with lawmakers that many taxpayers feel is shared by some lawmakers themselves: When the bill passed the Senate on Dec. 16, Sen. Orrin Hatch (R-UT) stated that H.R. 5771 was “quite literally the best we could do.”
The thing to do now is to focus on the 2014 tax year and to put off worrying about 2015 until, oh, December. What follows is a review of some high-profile deductions and credits that may pull some Californians from the edge of their own fiscal cliffs.
Mortgage debt forgiveness. The foreclosure crisis may have abated, but there are still distressed homeowners out there, homeowners who owe more than their property is worth, even in California. The California Association of Realtors reported recently that distressed property sales increased from October to November 2014. Almost 5 percent of all sales in November were short sales. So, yes, there are still homeowners who are struggling to pay their mortgages, who are burdened with mortgages loans that exceed the value of their homes.
There are a few ways a homeowner can handle an "underwater" mortgage. We will go through some of them in our next post.
Source: Forbes, "10 Expired Tax Provisions That Might Affect You In 2014," Kelly Phillips Erb, Nov. 24, 2014