There were 55 tax breaks that expired when the clock struck midnight on New Year's Eve that will affect millions of American businesses and individuals.
The practice of letting numerous tax breaks expire during Congress's December vacation has become a yearly tradition. In 2012, 36 tax provisions expired on the last day of the year. In 2011, there were 58.
While Congress has allowed the tax provisions to expire, they have also made a point to eventually renew them retroactively. That has allowed tax payers to claim the breaks on their tax returns. In this case, because the provisions were in effect throughout 2013, they will not affect tax returns until 2015.
But relying on Congress to retroactively renew tax breaks just because they have in the past is an unsettling proposition for tax payers. Congress didn't renew the provisions that expired in 2011 until New Year's Day 2013. What if they wait even longer this time?
"It's a totally ridiculous way to run our tax system," Rachelle Bernstein, vice president and tax counsel for the National Retail Federation, told the Associated Press. "It's impossible to plan when every year this happens, but yet business has gotten used to that."
This year's expiring provisions range from credits for companies that invest in research and development, to more obscure breaks, like credits for race horse owners.
While some of the obscure tax provisions won't affect most investors, there are plenty that have far-reaching ramifications...
Happy New Year to you too, Congress!
Here are six of the expiring tax breaks that will deliver the biggest impact to taxpayers, investors, and small businesses:
In order to qualify for the credit, the research must have been done in the development phase of a new or improved product or business process. Therefore, research dealing with marketing, general data collection, or business management has been excluded in the provision. Much of the research that traditionally qualified for the credit was technological in nature.
Likewise, a provision that credits purchasers of energy-efficient appliances has just expired. That would save the government approximately $700 million in the next 10 years. Finally, a credit for energy-efficient commercial buildings expired in 2013.
If recent history is any indication, Congress will eventually renew many of the 55 tax provisions it cut on Jan. 1, 2014 - but for investors and taxpayers, we have to wait and see when that actually happens.
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