Jan. 21, 2015 – President Barack Obama on Dec. 19, 2014, signed into law the Tax Increase Prevention Act of 2014 (HR 5771), otherwise known as the “Tax Extenders” Act, which retroactively extended through the end of 2014 more than 50 tax breaks that expired on Dec. 31, 2013.

Congress discussed making a number of these tax breaks permanent, particularly the Bonus Depreciation and Section 179 deductions, but ultimately punted the fate of extending these tax breaks to the incoming 114th Congress for tax year 2015.

Thus, these very same provisions expired on Dec. 31, 2014, and corporate and tax attorneys and other tax professionals alike are left with the same tax planning uncertainties heading into 2015. The following are some of the most popular individual and business extenders that taxpayers may claim on their 2014 return.

State and Local Sales Tax Deduction

Section 164(b)(5) of the Internal Revenue Code (“Code”) allows a taxpayer to claim an itemized deduction for state and local sales tax instead of state and local income taxes. Individual taxpayers who made a big-ticket purchase in 2014, such as the purchase of a new luxury vehicle, boat, or recreational vehicle, can benefit from comparing the amount of sales and local sales taxes paid versus the amount of state and local income taxes and elect to claim as an itemized deduction the larger of the two. In states with no state or local income tax, this overlooked election can result in significant tax savings for taxpayers.

Charitable Distributions from IRAs

Many of us have high-net worth clients who are both exceptionally successful and extremely philanthropic. They engage as volunteers and donors for charities near and dear to their hearts. Whether it is ending hunger or finding a cure for cancer, diabetes, ALS, or AIDS, we have found these clients are constantly driven to advance the movement by volunteering their time and experience, and most important, by making a cash donation or bequest to the charity.

Our job as tax and estate planning professionals is to present clients with all options regardless of our level of involvement in carrying out the gift. Yes, advising and recommending that a high net worth create and fund a charitable remainder or lead trust may be the best option for your client.

However, for other clients, especially those clients over 70 1/2 and already in a high tax bracket, a great option is to take advantage of the tax break under section 408(d)(8) of the Code, which allows taxpayers to make a tax-free distribution up to $100,000 directly from their retirements accounts to a charity.

Not only does this distribution qualify as a required minimum distribution, this charitable deduction may push your client into a lower tax bracket and result in significant tax savings.

Bonus Depreciation

Bonus Depreciation allows taxpayers to claim an additional first-year depreciation deduction that can result in significant income tax savings. For example, an owner of a commercial property could make $1 million of improvements and elect to take the accelerated deduction versus the straight-line deduction.

The tax benefit to the owner is significant in that this owner will end up paying nearly $170,000 less in income taxes than if the owner elected to use the straight-line method.

This Bonus Depreciation deduction encourages immediate new investment. However, Congress’ inaction in making this tax break permanent and delaying extending this tax break until the wee hours of 2014 severely thwarts this investment.

Moreover, it left us once again asking whether Congress will extend this tax break through this tax year in the same manner.

Section 179 Deduction

As with the Bonus Deprecation deduction, the Section 179 deduction that allows taxpayers to deduct all of the cost of fixed assets that are otherwise capitalized, with their deductions spread over three to 20 years, places us once again in the uncomfortable position of answering the question of whether Congress would extend this tax break through the end of 2014.

Again, we must answer in the familiar, “I don’t know,” otherwise we open ourselves up to liability in the event that Congress does not act.

Similar to the Bonus Depreciation deduction, the Section 179 deduction also encourages investment in capital equipment by allowing taxpayers to immediately deduct, rather than gradually deduct, the cost of qualified assets, subject to certain limitations (the Section 179 limit is set at $500,000 for 2014).

However, to qualify for this deduction, the asset must be paid for and placed in service in 2014. That is, taxpayers had a mere 12 days of tax planning certainty to purchase and place a capital asset into service by the end of 2014.

Domestic Production Activity Deduction and Schedule UTP

In addition to the tax extenders highlighted above, a number of other planning concepts are critical for businesses in 2015. For example, the Domestic Production Activity Deduction (DPAD) is a key planning opportunity for many Northeastern Wisconsin businesses that is often overlooked because the computations behind claiming the deduction can be daunting.

Finally, many businesses may be surprised to learn that they are now required to file a “Schedule UTP” in 2014 as the total asset requirement fell from $50 million to just $10 million. On this schedule, businesses are required to report their “Uncertain Tax Positions.”

Take great care when filling out this schedule. By disclosing more than the taxpayer is required to disclose, you risk accidentally waiving attorney-client privilege, section 7525 tax advisor privilege or work product doctrine.

A lengthy list of other individual and business extenders can be found in the text of the Tax Increase Prevention Action of 2014.