Federal, State, Local andInternational Taxes -Thanksto the passage of the American Taxpayer Relief Act of 2012 (ATRA), many taxprovisions that expired in 2011 were retroactively extended (or made permanent)that are of benefit to taxpayers filing 2012 returns this year. Here are six ofthem:
Education-Related Tax Deductions - ATRA extended,through 2017 and retroactive to 2012, two popular and widely usededucation-related tax benefits that expired in 2011: the deduction forqualified tuition and related expenses and the deduction for certain expensesof elementary and secondary school teachers. Both are above-the-linedeductions, which means that they can be taken before calculating adjustedgross income (AGI).
Limited Non-Business Energy PropertyCredits- Non-business energy credits expired in 2011, but were extended (retroactiveto 2012) through 2013 by ATRA. For 2012 (as in 2011), this credit generallyequals 10 percent of what a homeowner spends on eligible energy-savingimprovements, up to a maximum tax credit of $500 (down significantly from the$1,500 combined limit that applied for 2009 and 2010).
Becauseof the way the credit is figured however, in many cases, it may only be helpfulto people who make energy-saving home improvements for the first time in 2012.That's because homeowners must first subtract any non-business energy propertycredits claimed on their 2006, 2007, 2009, 2010, and 2011 returns beforeclaiming this credit for 2012. In other words, if a taxpayer claimed a creditof $450 in 2011, the maximum credit that can be claimed in 2012 is $50 (for anaggregate of $500).
Thecost of certain high-efficiency heating and air conditioning systems, waterheaters and stoves that burn biomass all qualify, along with labor costs forinstalling these items. In addition, the cost of energy-efficient windows andskylights, energy-efficient doors, qualifying insulation and certain roofs alsoqualify for the credit, though the cost of installing these items do not.
Mortgage Insurance Deductible asQualified Interest - ATRAextended, through 2013 (and retroactive to 2012), a tax provision that expiredin 2011 that allows taxpayers to deduct mortgage insurance premiums asqualified residence interest. As such, taxpayers can deduct, as qualifiedresidence interest, mortgage insurance premiums paid or accrued before Jan. 1,2014, subject to a phase-out based on the taxpayer's AGI.
AMT "Patch" Made Permanent - The AMT'patch" was made permanent by ATRA; however, exemption amounts for 2012and beyond are higher than in years' past and are now indexed to inflation. Fortax-year 2012, the alternative minimum tax exemption amounts increase to thefollowing levels:
Transportation "FringeBenefits" - Parityfor transportation fringe benefits provided by employers for the benefit oftheir employees expired at the end of 2011; however, ATRA reinstated thisparity retroactive to 2012. As such, the monthly limit for qualified parking is$240 and the benefit for transportation in a commuter highway vehicle or atransit pass is $245 for tax year 2012.
State and Local Sales Taxes - Retroactive to2012, ATRA extended (through 2013) the tax provision that allows taxpayers whoitemize deductions the option to deduct state and local general sales and usetaxes instead of state and local income taxes.
Ifyou have questions about these or other tax changes, please call us. We'd behappy to assist you. Call us today for no obligation free consultation!
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