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Tax Breaks in Danger for 2012

Posted By Miranda Marquit On 02/13/2012 @ 12:16 pm In Taxes | 12 Comments

Recently, 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 [3] (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 [4]. 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 [5] is likely to fall.

(Photo: 401K [6])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/tax-breaks-danger-2012.html

[3] mortgage interest deduction: http://www.bargaineering.com/articles/mortgage-interest-deduction-myth.html

[4] mass transit: http://www.bargaineering.com/articles/can-you-really-give-up-your-car.html

[5] average tax refund: http://www.bargaineering.com/articles/average-tax-refund.html

[6] 401K: http://www.flickr.com/photos/68751915@N05/6629120915/

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