I’m also disappointed to see the deduction for donations made directly from IRAs disappear.
You’ll face a higher tax bill next spring if Congress doesnt act to revive a series of tax breaks that expired Dec. 31, 2011. Among the breaks that Congress didnt extend in all the sturm-und-drang over the payroll tax holiday are:
Alternative minimum tax patch
The AMT is a parallel tax system created more than 40 years ago 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.
Deduction for direct IRA payouts to charity
Retirees who are 70 or older could direct up to $100,000 of their IRA distributions directly to charity and exclude the donated amounts from taxable income. Not anymore in 2012, unless Congress reinstates this deduction.
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.
Teachers supplies deduction
Teachers, even if they didnt itemize, were able to take an additional deduction of up to $250 for classroom supplies they paid for out of their own pockets.
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.
Mortgage insurance premium deduction
Homeowners who dont exceed certain income limits had been able to deduct premiums they pay on mortgage insurance policies issued after 2006 on their primary residence.
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.
We think Congress will manage to revive these breaks — eventually — with the exception of the transit subsidy, whose chances are no better than 50-50. But you may spend much, if not all, of 2012 in a state of uncertainty. The political atmosphere in Washington is so toxic that it is 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.
If lawmakers wait too long, in 2013, we may have a repeat of the 2006 and 2010 filing seasons, when many taxpayers had to wait for the IRS to reprogram its computers before they could file their tax returns. In both cases, the start of the filing season was delayed for many until early to mid February.