Heads up for tax changes

Monday, December 05, 2011

The National Society of Accountants (NSA) offers this checklist of tax provisions slated for removal at the end of 2011 as well as some that will be continued through 2012. “As usual, the federal tax code is an ever-changing minefield of provisions that can trip up even the most diligent taxpayer,” says NSA Executive Vice President John Ams.   Tax provisions that would be going away after 2011, barring any last-minute extensions by the U.S. Congress:

• Payroll tax cut for employees and self-employed individuals
• Tax-free IRA distributions to charity
• Increased (to 100%) exclusion for sales of qualified small business stock
• Above-the-line deduction for higher education tuition costs
• Above-the-line deduction for certain out-of-pocket classroom expenses
• Deduction for state and local general sales taxes in lieu of state and local income taxes
• Mortgage premium insurance deduction
• First-time homebuyer credit for purchase of a principal residence in the District of Columbia
• Plug-in conversion credit for vehicles converted from standard to plug-in electric drive motor vehicles
• Residential energy property credit for qualified energy efficient improvements and expenditures
• Increased Alternative Minimum Tax (AMT) exemption amounts for individuals
• Nonrefundable tax credit offset of your entire regular and AMT tax liability

Several tax provisions that have been extended through 2012 include:

• Reduced marginal tax rates of 10, 15, 25, 28, 33, and 35 percent
• Lower rates of zero- and 15-percent for capital gains, dividends and certain property held for more than five years
• Marriage penalty relief for taxpayers filing joint returns
• Repeal of exemption and itemized deduction phaseouts
• Various education-related incentives including (1) exclusion from income and employment taxes for employer-provided education assistance; (2) exclusion from income for National Health Service Corps Scholarship and Armed Forces Scholarship programs; (3) student loan interest deduction; (4) Coverdell Education Savings Accounts contribution limit and related provisions; and (5) American Opportunity Tax Credit (AOTC).
• Amendments made to the child tax credit, including the increased credit amount of $1,000 per qualifying child
• Child and dependent care credit enhancements, including the increased maximum credit percentage of 35 percent, higher income limits, and increased maximum amount of qualifying expenses
• Increased maximum amount of the earned income tax credit and broader AGI phaseout ranges for taxpayers with three or more qualifying children

Consumer Action recommends that you speak with your tax preparer about whether these or any other provisions would benefit you when filing your taxes.