Tax Breaks That May Go Extinct in 2012

Despite being only about two months away, it is never too early to consider how to get the most out of your taxes in 2012. April 17^th, the deadline for IRA tax filing, is right around the corner and there are nine popular tax breaks that Congress did not extend into the New Year.

    Kiplinger.com, a personal financial advisor and business forecaster, provides the 9 popular tax breaks no longer available in 2012:  

1. Alternative minimum tax patch

• Was used to prevent excessive use of tax breaks by the very wealthy, ensuring they pay at least some tax
• Taxpayers whose income exceeds the AMT exemption – in 2011, $48,450 for individuals and $74,450 for married couples filing jointly – must calculate both regular tax and AMT liability and pay the larger of the two amounts
• But exemption levels have, at least tentatively, dropped to $33,750 for individuals and $45,000 for married couples filing jointly in 2012, which will expose 31 million taxpayers to the higher AMT this year, according to Tax Policy Center estimates

2.    Higher mass transportation benefit

• A 2009 federal stimulus provision raised the maximum an employee could receive for transit, tax-free, from $120 to $230- that matched the tax-free limit for parking
• With the expiration of this break, the maximum for 2012 dropped to $125
• Employees who’ve asked to have an amount higher than that withheld from their paycheck to cover their total commuting costs will see their net pay come down, as the difference is now taxed.

3.    Deduction for direct IRA payouts to charity

• Retirees who are 75 or older could direct up to $100,000 of their IRA distributions directly to charity and exclude the donated amounts from taxable income; however, not anymore in 2012, unless Congress reinstates this deduction

4.    Write-offs for state sales taxes

• This particularly significant expired break allowed you to deduct either state income tax or state sales tax from your federal taxable income

5.    Teacher’s supplies deduction

• Teachers, even if they didn’t itemize, were able to take an additional deduction of up to $250 for classroom supplies they paid for out of their own pockets.

6.    Tuition and fees deduction

• Taxpayers (up to certain income limits) who can't claim the more advantageous American Opportunity or Lifetime Learning credits can still reduce taxable income by up to $4,000 for tuition and other qualifying educational expenses -- if, of course, Congress reinstates this break

7.    Mortgage insurance premium deduction

• Homeowners who don’t exceed certain income limits had been able to deduct premiums they pay on mortgage insurance policies issued after 2006 on their primary residence

1. Personal tax credits applied against the alternative minimum tax

• Credits such as the tuition and dependent-care credits were allowed to offset your AMT liability.

8.    Research and Development credit

• Like the AMT patch and direct IRA payouts, this credit, which allowed high-tech companies and others to subsidize research in areas that might go unexplored, has broad support- but it still falls to Congress to reauthorize it periodically

However, contributing editor of Kiplinger.com, David Muhlbaum believes Congress will eventually manage to revive the tax breaks. Nevertheless, according to Muhlbaum, because of the current “toxic” political atmosphere in 2012, it’s “doubtful the parties will reach agreement before the end of 2012, when Congress will have to take up the question of extending the Bush tax cuts”.

Despite such seemingly dismal news, we at Drescher Insurance can help you plan for the future in terms of protecting your assets by assisting you with CT business insurance and CT personal lines insurance from some of the nations top insurance companies. Please contact us today