The Senate voted 76-16 Tuesday to approve a House bill that preserves several dozen tax provisions, known as “tax extenders,” from January 1, 2014 through the end of the year, essentially providing a one-year retroactive extension. The collection of provisions, which includes tax breaks and deductions, was set to expire as of the end of 2013.
The Senate’s action gives advisors a reason to reach out to clients to discuss potential strategies.
Many of the provisions apply to businesses, but some affect individual investors, including a provision for individual retirement account (IRA) owners over the age of 70½, who can direct up to $100,000 from an IRA to a qualified charity tax free. Now that the provision is extended, investors can take advantage of this strategy in December in place of taking a required minimum distribution (RMD). For more information on how it works, explore “Donating IRA assets to charity.”
Other popular tax provisions that were extended include:
- Higher education tax credit
- Deduction for state and local taxes
The bill will be sent to the president for signature. In past years, Congress has typically voted to extend these provisions for another year. In a separate action, the Senate’s approval of a $1.1 trillion spending bill last Saturday avoided a government shutdown and funds government operations through September 2015.