Monday, December 19, 2011

Six Tax Breaks Expiring At The End of 2011

TaxImage by 401K via FlickrBefore you know it the holidays will be over and tax time will be here. As this year comes to a close several tax breaks will be ending for good. Before 2012 arrives be sure to take advantage of them.

Listed below are the six tax breaks about to expire unless Congress extends them:

1. Expenses For Higher Education.

The deduction of up to $4,000 for qualified higher education expenses won't be available after 2011. It probably is smart to consider prepaying eligible expenses for 2012. The deduction applies to tuition and fees paid in connection with enrollment at an institution of higher education during 2011 or the first three months of 2012. The maximum deduction is available to taxpayers with adjusted gross incomes of up to $65,000 for singles and $130,000 for joint filers. A deduction of $2,000 is allowed for singles with adjusted gross incomes of up to $80,000, or joint filers with adjusted gross incomes up to $160,000.

2. Adoption Tax Credit.

The Adoption Credit and Adoption Assistance Program lets adoptive parents claim a credit against their federal tax of up to $13,360 for "qualified adoption expenses" for each adopted child. Though new access to the credit expires when the program ends on Jan. 1, the rules allowed the credit to be carried forward over five years.

3. Sales Tax.

If you don't pay state and local income taxes -- a common situation for retired public employees or those living in 'no-income-tax' states like Florida -- you have had the choice of using the optional sales tax deduction to cut your federal income tax. After 2011, that option goes away. So if you're planning to buy big-ticket items like a new car in the near future, you might want to push them up into 2011 to get those last deductions.

4. Mortgage Insurance Premiums.

As of 2012, you won't even be able to take the mortgage insurance premium deduction. 2011 is the last time homeowners with joint adjusted gross incomes of less than $109,000 will be able to deduct the cost of mortgage insurance on a first or second home.

5. Teachers' Classroom Materials.

For years, K-12 teachers, instructors, counselors, principals or aides who worked in a school for at least 900 hours during a school year could claim an "above the line" deduction for up to $250 of expenses incurred for books, supplies, computer equipment or supplementary materials used in the classroom. Shop now, teachers: Starting next year, that deduction will disappear like kids vanishing from the classroom when the bell rings.

6. Energy-Efficient Home Upgrades.

Making energy-saving improvements to your home not only cuts down on heating and cooling costs, it also earns you a tax credit. For example, if you add extra insulation in your attic, replace drafty old windows with modern thermal-pane models, or install an energy-efficient heater or air conditioner, you're eligible for a tax credit of 10% of the cost, up to $500. You don't have to attach the manufacturer's certification that the property meets the requirements for the credit to your tax return, but you must maintain records that establish your entitlement. However, if you've claimed this credit for upgrades in past years, you can't do it again: It's a one-time deal.


These tax breaks should all be considered with the help of a knowledgeable tax preparer.

No comments:

Post a Comment

Join 1000's of People Following 50 Plus Finance
Real Time Web Analytics