Dec 20, 2014 3 min read

WASHINGTON – In an almost annual ritual, Congress passed a last-minute package of temporary tax breaks, sparing millions of businesses and individuals from unwanted tax increases just weeks before start of filing season.

Congress extends these tax breaks every year or two, usually at the last minute, drawing complaints from business leaders tired of the uncertainty. This year’s package will add nearly $42 billion to federal budget deficit, according to congressional estimates.

Things to know about the year-end tax package, which President Barack Obama signed into law Friday:

Businesses big and small, commuters who use public transportation, teachers who spend their own money on classroom supplies and people who live in states without state income taxes.

The package of 54 tax breaks is a collection of narrow provisions targeting specific groups and industries, held together by a few broad tax breaks that benefit millions.

In all, they affect about one in six taxpayers, according to the Tax Institute, the independent research arm at tax giant H&R Block.

Some of the tax breaks were originally intended to be temporary, but powerful interest groups keep them alive year after year. Others are popular but expensive, leaving some deficit-weary lawmakers reluctant to make them permanent.

Yes, the vast majority of them expired at the beginning of the year. The bill Congress passed retroactively extends them through the end of this year, enabling taxpayers to claim them on their 2014 income tax returns.

Tax experts said it’s terrible policy to let these tax breaks expire repeatedly, only to renew them retroactively at a later date.

Consider this: The tax credit for research and development is supposed to provide an incentive for businesses to invest in R&D. The credit expired in January and was just renewed, nearly 12 months later. How much incentive do you think the credit provided while it was expired?

Also, business groups complain that companies can’t accurately project expenses from year to year because they don’t know for sure whether Congress will renew their tax breaks.

The tax breaks expire again Jan. 1, creating more uncertainty next year.

Lawmakers from both political parties say they want to overhaul the tax code, presumably dealing with these tax breaks once and for all. That would be a heavy lift, even with one party – Republicans – controlling both the House and Senate.

If Congress can’t accomplish a tax overhaul, lawmakers may still try to make some of the tax breaks permanent while letting others expire. If they fail, Congress could be right back where it was this year, passing another last-minute temporary tax package.