Tahlequah Daily Press

Local News

March 3, 2014

Key tax deductions phased out for ‘14

Final in a two-part series about tax filing season

TAHLEQUAH — The federal government may have shut down briefly last year, extending the opening of tax filing season to Dec. 31. But filing deadlines remain the same: April 15, or Oct. 15 for an extension.

Denise Deason-Toyne, certified financial planner and local attorney, pointed out several items taxpayers need to remember when filing their 2013 returns.

“First off, several deductions expired at the end of 2013, meaning as long as you took advantage of the deduction before the end of December, they can be claimed.”

Expired deductions include teacher’s classroom expenses, mortgage insurance premiums, IRA distributions to charity, state and local sales taxes, and certain home renovations made for energy efficiency.

“Teachers can deduct up to $250 worth of unreimbursed expenses, and the deduction – called an ‘above-the-line’ deduction – means it is made before they get to adjusted gross income, and is available whether the teacher itemizes or not,” said Toyne.

The mortgage insurance premium deduction expiration does not affect homeowners who itemize.

“Homeowners who have less than 20 percent equity generally pay for private mortgage insurance, and those premiums were deductible in 2012 and 2013, but this deduction also expired at the end of December,” said Toyne.

Changes this year to filings include higher taxes for top earners. Legislation enacted in January 2013 revived the 39.6 percent rate for taxable income over $400,000, or $450,000 for married couples. According to Toyne, taxpayers in this bracket will now pay a 20 percent rate on long-term capital gains and dividends. Congress also phased out itemized deductions and personal exemptions for taxpayers with adjusted gross income of $250,000 or more, or $300,000 for married couples.

Oklahoma does not recognize same-sex marriage, and same-sex couples may have a difficult time with filing this year, according to Toyne.

“Same-sex couples will have to file joint returns with the Internal Revenue Service, but will have to file as single on state returns,” said Toyne.

Many states typically base tax returns on federal returns, and same-sex couples may have to create “dummy” federal tax returns as single filers before they can complete their state forms.

Those who are self-employed may find home-office deductions simpler to figure this year. According to Toyne, a change that took effect in 2013 makes it easier to claim the break and lessens the chance of an audit.

“New IRS rules employ a simple formula that’s based on office size,” said Toyne. “Qualifying taxpayers may deduct $5 per square foot, up to 300 square feet, or $1,500.”

The rule, however, does not change the eligibility requirements. The office space has to be used on a regular basis and only to conduct business.


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