Here's a surprise: Congress is ready to debate the so-called tax extenders that expired at the end of 2014. Accounting Today reports that the IRS has issued its annual warning that the tax season could start late if Congress does not act soon. If the past few years are any indication, the bill will be passed at the latest possible hour, the extenders will be enacted for 2015 only, and we will be right back where we started. Second verse, same as the first.
Tax extenders are credits and deductions that reduce the tax obligations of individuals and businesses. The list includes things like the research and development credit for businesses and the mortgage debt forgiveness exception for homeowners. In all, there may be more than 50 items to address.
Some of these are straightforward items that require a straightforward yes/no vote. "How much did you pay for x? Deduct that amount." It is the items that limit the deduction or credit to a certain dollar amount that tend to spur debate. For example, should the American Opportunity Tax Credit (which we discussed in September) be adjusted annually for inflation?
There is also a debate brewing over taxes that are part of the Affordable Care Act, including the Cadillac tax. Part of the debate is whether to debate the ACA at all: These are not actually tax extenders, and adding such contentious items to the list could delay passage of all of them.
These are more than feel-good tax breaks. According to H&R Block's Tax Institute, the whole package would save taxpayers more than $80 billion in all. For example: About 4 million taxpayers took advantage of the mortgage insurance premium deduction. Their total savings? $5.8 billion.
Once again, the challenge for congressional leadership will be to get this taken care of by Dec. 31. With 2016 being an election year, their colleagues' attention may be elsewhere come January.