Tips on Updated Provisions

The recently passed legislation that avoided the “fiscal cliff” also brought some opportunities for tax savings. We have outlined some of them below.

Pre-tax Mass Transit Benefit

In early January 2013, the House and Senate passed the American Taxpayer Relief Act (ATRA) which included a retroactive provision regarding the pretax mass transit benefit offered by many employers to its employees. The Act contained a retroactive provision hiking the cap to $240 a month, up from $125 a month for employees enrolled in this benefit plan. Although most employers would have already sent out W-2’s before guidelines from the IRS were received, it is possible that your employer might be making arrangements to let employees take advantage of the potential tax savings that could result in a decrease of taxable income. If you participated in a mass transit pass or van pool benefit program for tax year 2012, contact your employer to find out about the possibility of their adjusting your 2012 earnings to take advantage of the retroactive provision of the Act. It could mean a reduction in your taxable Federal and State wages, including Social Security and Medicare wages.

Residential Energy Credits

The Residential Energy Credit was revived for 2012 and 2013. The 10% credit allows for a maximum deduction of $500 on energy efficient improvements to your home. But the rules are specific and, for example, a new furnace does not automatically mean a deduction. Certain standards have to e met. If you have any questions regarding the credit or your eligibility please contact us.

Charitable Giving

Also revived was a provision regarding donations to charities from IRAs by those age 70 ½ and older. It again allows for direct transfer from the IRA of up to $100,000 tax free to eligible charitable organizations.

From Fillo Financial LLC