Taxes 
12
comments

Tax Breaks in Danger for 2012

Email  Print Print  

TaxRecently, Congress extended the expiring payroll tax cut by two months, in an effort to provide the tax break for struggling workers during economic times that are still tough for many. The move puts off what is likely to be a bitter election-year fight over the federal budget.

However, the payroll tax cut isn’t the only tax break on the chopping block. While you can still take certain tax breaks for 2011, what will be available for 2012 is up for debate. Here are some of the tax breaks, according to Kiplinger, that expired at the end of 2011, and that Congress has to decide what to do with during 2012:

Sales Tax Deduction

One of the most popular and helpful tax deductions was the one for state taxes. You could choose to deduct your state income tax, or your state sales tax (helpful in states that don’t collect an income tax). This deduction was great for reducing your taxable income for federal tax purposes. However, the measure expired, so, starting in 2012, you can’t take this deduction — unless Congress reinstates it.

Mortgage Insurance Premium Deduction

Many homeowners (meeting income requirements) have been able to deduct mortgage insurance premiums on policies issued after 2006. Many are familiar with the mortgage interest deduction (which remains), but the cost of mortgage insurance premiums can also be significant. However, this tax break might be gone forever unless Congress renews it.

Mass Transit Benefit

In an effort to include the use of mass transit, there is a benefit for transportation costs on buses, subways and other types of mass transit. The benefit was raised to $230 in 2009. However, that increased benefit disappears in 2012, to be replaced with a lower benefit of $125.

Tuition and Fees Tax Deduction

Many students find themselves in tough circumstances, especially since tuition and fees can become quite expensive. For some years, taxpayers who meet income requirements have enjoyed a tax deduction of up to $4,000 for qualified expenses. However, the deduction is disappearing, leaving students to bear the entire cost without the benefit of an offsetting deduction.

Deduction for Teacher Supplies

Many teachers reach into their own pockets to provide supplies for their students. Many teachers choose to itemize some of these expenses. However, Congress has provided them with a deduction — that didn’t need to be itemized — of $250 for out of pocket supply expenses. However, this deduction expired in 2011, and is up for debate in 2012.

Paying More in Taxes

You could easily find yourself paying much more in taxes in 2012. Depending on the types of deductions and other benefits you have been used to, you could be losing out on quite a bit if Congress doesn’t act to extend some of these tax breaks, or even make them permanent.

Many expect the payroll tax cut to be extended at least through the end of 2012, and maybe through 2013, but some of these other benefits may not be so fortunate. It’s easy to get used to these types of tax breaks, and expect them as a matter of course. However, as this year illustrates, you can’t take any tax break for granted and if these don’t get renewed, the average tax refund is likely to fall.

(Photo: 401K)

{ 12 comments, please add your thoughts now! }

Related Posts


RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

12 Responses to “Tax Breaks in Danger for 2012”

  1. Casavvy says:

    I think congress needs to take a hard look at tuition and deductions for teachers who spend their own money. With the economy needing more jobs to get it back on track, everything will come back to education and by making that harder for everyone it is just preventing everything from moving forward.

    • thunderthighs says:

      @Casavvy: I really don’t think that extra pack of markers for a classroom of first-graders is going to generate jobs for them later.

  2. matt says:

    Please keep us updated if anything happens either way! Those are big-time changes that have a large effect on the bottom line.

  3. Daniel says:

    The state income tax deduction would easily be the worst. This hurts almost everyone who makes estimated taxes, even for people who don’t make a ton of money.

    But I can’t tell from this article (http://money.cnn.com/2012/01/09/news/economy/congress_tax_deductions/index.htm) whether the sales tax deduction is going away or if both the income and sales tax deduction are disappearing.

    Can you find anything definitive about this?

    • Miranda says:

      It’s an either-or thing. You can take the income tax deduction OR the sales tax deduction. It’s considered one tax break. So, both are basically in danger, since the option to take one or the other is up for expiration.

      • Daniel says:

        from what I saw, the tax break for state sales tax was a temporary addition because 9 states have no income tax and only that was set to expire, while the state income tax was a permanent deduction.

        • Miranda says:

          Maybe I read it wrong, then. I know that you can’t take both :) I’ve just double-checked. Looks like it’s the sales tax provision in danger. The option to take state or local income tax deductions remains. Thanks for bringing it up!

        • govenar says:

          I think Daniel’s right that it’s just the sales tax deduction that’s expiring (though I’m guessing it’ll be extended), not the state income tax deduction.

          Giving the choice of deducting state income or sales tax seems kinda unfair to me. It helps people in states with no income tax, but in most cases doesn’t help people in states with income tax. In California I have to pay sales taxes too, so why can’t I deduct them?

          • Texas Wahoo says:

            The idea is that states should not be punished because they choose to collect taxes in a different manner (income/property/sales). States without income taxes tend to have higher property/sales taxes.

          • It’s the sales tax deduction. Eliminating the state tax deduction will come later along with taxing muni bond interest.

  4. Scott says:

    “Average tax refund is likely to fall”? That number means nothing. Average tax liability is what matters. I can make the average tax refund go back up just by withholding more. Ideally, the average tax refund is zero, but too many Americans don’t understand finance enough to realize they are giving their government an interest free loan every year.

  5. Higher gov’t spending = higher taxes = lower economic growth = even higher gov’t spending…… get used to it. Our kids will be emigrating to other countries for economic opportunity.


Please Leave a Reply
Bargaineering Comment Policy


Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2014 by www.Bargaineering.com. All rights reserved.