The end of the year is fast approaching and many taxpayers are starting to look for ways to get the best bang for their buck with tax deductions. However, several key tax breaks are expected to expire on December 31, and that could cost tax payers in 2014.
Tax experts said the savviest customers need to take advantage of tax deductions now before it’s too late. Congress could extend some tax breaks or decide to re-instate others, but the tax deductions for teachers, homeowners and even students could disappear with the new year.
“The biggest, most important thing to do is actually take an assessment of where you are at,” explained Krier Wealth Management’s Joe Krier. “A lot of people are recovering from Christmas spending and so forth, and it’s a great time to make a list of your assets and your liabilities.”
Krier said among the breaks that will be missed the most are tuition and fees credit, that allows people to claim up to $4,000.
”If you're taking home 50-thousand, well you're only paying taxes on 46 of that. Depending on where you fit in that particular tax bracket, that's a direct savings of about $1200 a year,” said Krier.
Teachers’ expense deductions may also be taken off the table. That deduction typically gives teachers a $250 deduction for any out-of-pocket classroom purchases.
“It’s a good idea for teachers to go ahead, to spend that money now,” said Krier.
The mortgage debt forgiveness credit could also be eliminated, which means trouble for more than 6 million Americans.
"Anybody who has less than 20% equity in their homes is paying for mortgage insurance and that's a flat out deductible that's actually going away and there's a few deductions that were targeted at people that were sort of recovering from the credit bubble... like if your home was foreclosed on you did not have to report the forgiven part of that loan as income. Well, those people will have to start recording that as income at this point,” said Krier.
Krier also told Channel 4 that unless Congress steps, millions of unemployed Americans will also take a hit.
“Long term unemployed benefits are expiring next Wednesday. And unless Congress comes back to the table and passes an emergency bill, there's almost 2 million Americans who are going to lose their unemployment benefits 54 and this particular program was paying about $300 a month to people,” said Krier.
Tax experts want consumers to keep another thing in mind for the upcoming tax season, there will be a delay in 2014 when people start to file. The 16-day government shut down that happened earlier this year, resulted in a pile-up of more than 400,000 documents. That means, instead of being able to file on January 21st in 2014, people will have to wait until January 28th and February 4th to file their taxes.
Congress is expected to take up the tax breaks in mid-January.