Eight Tax Breaks That Could End in 2014; Tax Plan Now to Keep Your Taxes Lower

Now is the time to sort out old clothes, furniture and house appliances and drive them over to the Goodwill or your favorite charity.  You will need to take advantage of any and all legal tax loopholes between now and December 31st.  Several tax provisions are scheduled to expire at the end of this year. Many of these tax breaks have been extended in the past, so it's possible Congress could extend them again over the next few months, but it may be too close to call, so use the next 45 days to make sure your taxes are lower with or without the following deductions.


1. Teachers' classroom expense deduction. Eligible educators who work in a school providing primary or secondary instruction can deduct up to $250 worth of unreimbursed classroom expenses.

2. Exclusion of cancellation of indebtedness on principal residence. The U.S. tax code treats forgiven debts as taxable income. However, if your principle residence is foreclosed or sold in a short sale before the end of the year, this provision allows you to exclude up to $2 million of forgiven debt from your taxable income.  (This is a big one - just hope this tax deduction is renewed)

3. Transit benefits. In 2013, employees can spend up to $245 pretax per month on transit benefits such as rail passes, which is on par with the $245 pretax they can spend on parking. That parity is scheduled to sunset at the end of this year so that the benefit for public transportation would drop to $130 per month pretax, while higher parking benefits will remain.

4. Mortgage insurance premiums. Homeowners who have less than 20 percent equity typically pay for private mortgage insurance (also known as PMI). Those premiums were deductible in 2012 and 2013, but that provision is scheduled to expire at the end of the year.

5. IRA distributions to charity. People older than age 70½ are required to take minimum distributions from their individual retirement accounts, so this provision allows them to contribute that money to charity without counting those distributions as income. The provision can keep income low enough for an individual to qualify for other tax breaks that may have phase-out limits.

6. State and local sales tax. If you pay state or local income tax, you can deduct that amount from your federal taxes if you itemize. (If you live in states such as Texas and Florida, which don't have state income tax, check with your tax professional)

7. Electric vehicles. Consumers who buy a qualified electric plug-in vehicle may be eligible for a tax credit of up to $7,500 depending on the size of the car's battery pack.

8. Remodeling your home for energy efficiency. Homeowners who remodel for energy-efficiency can take a credit of up to $500 over their lifetime. This provision has existed since 2006, so many taxpayers have already used the credit. There is a separate $500 credit available for energy-efficient appliances. If you haven't used the credit yet, there's still two months left to install new windows or buy an energy-efficient washing machine.