What Was the Tax Relief Act of 2014?

The Tax Increase Prevention Act of 2014, signed into law in December of that year, was retroactive legislation. It addressed the expiration of more than 50 temporary tax provisions, often called “tax extenders.” These provisions had expired at the end of 2013, creating uncertainty for taxpayers during the filing season.

This legislation provided a short-term fix by extending these expired tax breaks for the 2014 tax year. The late passage of the act, just days before the end of the year, highlighted its temporary nature. It was a legislative patch designed to prevent immediate tax increases while deferring a debate on the future of these tax policies.

Key Tax Provisions for Individuals

The Act reinstated several deductions for individuals for the 2014 tax year. One was the option for itemizers to deduct state and local general sales taxes instead of state and local income taxes. This benefited residents of states without a personal income tax, who could deduct sales tax paid on purchases using actual receipts or an IRS-prescribed amount.

Another extension was the above-the-line deduction for qualified tuition and related expenses. This deduction expired after 2020 and was replaced by the American Opportunity and Lifetime Learning credits. The law also extended the above-the-line deduction for educator expenses, permitting K-12 teachers to deduct up to $300 for out-of-pocket classroom supply costs.

For homeowners, the act renewed two provisions. The deduction for mortgage insurance premiums as qualified residence interest expired at the end of 2021. The act also extended the exclusion from gross income for the discharge of principal residence indebtedness, which has been extended through 2025. This protects homeowners from having forgiven mortgage debt counted as taxable income.

The legislation also brought back the IRA charitable rollover. This allowed individuals aged 70½ or older to make tax-free distributions of up to $100,000 from their IRAs directly to qualified charities. These distributions could satisfy the owner’s required minimum distribution for the year without being included in their gross income.

Key Tax Provisions for Businesses

The 2014 act renewed several tax incentives for businesses. One was the extension of the research and development (R&D) tax credit, which gave businesses a credit for a portion of their qualified research expenses.

The act renewed bonus depreciation, which for 2014 allowed businesses to immediately deduct 50% of the cost of new qualified property. For 2025, the bonus depreciation rate is 40% and is scheduled to continue phasing down.

The act also restored Section 179 expensing limits, which allow businesses to deduct the full purchase price of qualifying equipment. For 2014, the deduction limit was $500,000. For 2025, this limit has increased to $1,250,000, phasing out once total equipment purchases exceed $3,130,000.

The legislation extended the Work Opportunity Tax Credit (WOTC), which provides a credit to employers who hire individuals from certain targeted groups. This credit has been extended through the end of 2025. Additionally, it reinstated a 15-year straight-line cost recovery period for qualified leasehold improvements, restaurant property, and retail improvement property, allowing businesses to write off these costs faster than the standard 39 years.

The Achieving a Better Life Experience (ABLE) Act

Included within the Tax Increase Prevention Act of 2014 was the Achieving a Better Life Experience (ABLE) Act. Unlike the temporary extenders, this was a permanent change that authorized states to establish tax-advantaged savings programs for individuals with disabilities.

These programs allow for the creation of ABLE accounts, which function similarly to 529 college savings plans. While contributions are not federally tax-deductible, the funds grow tax-free. Distributions are also tax-free when used for qualified disability expenses, including costs for education, housing, transportation, and healthcare.

Eligibility to open an ABLE account is limited to individuals whose disability began before a certain age. The original age of onset was 26, but the ABLE Age Adjustment Act will increase this to 46, effective January 1, 2026. Funds in these accounts, up to a certain limit, are not counted as assets when determining eligibility for federal benefit programs like Supplemental Security Income (SSI) and Medicaid. This allows individuals to save without jeopardizing their access to benefits.

The Temporary Nature and Subsequent Legislation

The relief provided by the Tax Increase Prevention Act of 2014 was short-lived, as all the extended provisions expired again on December 31, 2014. This continued a cycle of last-minute legislative patches and created uncertainty for the 2015 tax year.

This recurring problem was addressed by the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act broke the cycle of annual extensions by making many tax extenders permanent, including the state and local sales tax deduction, the IRA charitable rollover, and the Section 179 expensing limits.

Other provisions were extended for multiple years, providing more certainty for planning. For instance, bonus depreciation and the Work Opportunity Tax Credit were extended, though they have been subject to later changes. The PATH Act marked a shift in policy by ending the annual debate over the future of these temporary provisions.