Des Moines —
January has historically been a stressful month in my household, as my wife battles the many forms it takes for us to comply with the tax code. I’ve heard many “early birds” express disdain about the inability to finish their taxes, since the tax law is still being decided upon by the Legislature. Many Iowans and tax preparers would like to see Iowa couple with the federal changes quickly, so tax preparation can get underway. To that end, House Study Bill 38 passed out of subcommittee last week, and was moved out of the Ways and Means Committee in bipartisan fashion on January 28, with a vote of 24-0. Some of the significant federal tax legislation enacted that affect the 2012 and 2013 tax year include the following:
· Deduction for up to $250 for out-of-pocket expenses for teachers.
· Tuition and fees deduction for higher education expenses.
· Election to deduct state sales/use tax in lieu of state income tax as an itemized deduction.
· Deduction for mortgage insurance premiums as deductible qualified residence interest.
· Nontaxable IRA transfers to eligible charities.
· Small businesses can now expense (instead of depreciate) the first $500,000 of equipment cost.
Some of the provisions that affect 2013 and subsequent tax years include the following:
· Provides for 50% bonus (accelerated) depreciation for assets acquired in 2013 only.
· Places a limitation on itemized deduction for high income taxpayers.
· Permanently extends the amounts ($3,000 for one child, $6,000 for two or more children) for the child and dependent care credit.
· Extends higher income thresholds and higher credits with families with three or more children for the earned income tax credit for five more years through 2017.
This bill will now move to the House floor for consideration. As you visit with tax preparers, you can tell them the House is moving quickly to provide certainty for taxpayers wanting to file their taxes.