As you finish up your tax preparation for 2011, its a good time to take a look at some of the tax breaks that ended December 31, 2011 and some others that will end this year. Knowing which tax breaks are being revoked can help you to make the most of them while they still exist and prepare for next year when things will likely change dramatically.
Several individual tax benefits expiried at the end of 2011. The major benefits that will no longer apply after the 2011 tax year include the higher alternative minimum tax exemptions that have been in place. These will be reverting back to their former limits, which were very low.
One tax break you have likely noticed is in your paycheck. In late 2010, Congress enacted a 2% reduction in the Social Security tax applied to payroll checks. This reduction was extended into 2012, but only for wages paid through February 29, 2012. If any employer over-withheld during January, corrections must be included in payroll checks no later than March 31, 2012.
Another tax break many will no longer be able to take advantage of concerns charity donations for seniors. 2011 is the last year that seniors can contribute to charities directly from their IRA without paying taxes on the withdrawal. This tax break applied to donations up to $100,000, but will no longer continue.
There will be some significant tax breaks ending in 2012, that will affect families and students, as well.
Families will feel the change when the child credit reduces from $1000 to $500 per child. In addition the childcare credit will reduce back to $2400 from the temporary increase of $3000.
There will be an end to the deduction for tuition and related fees. There are still tax credits available to help with higher education expenses, but you need to check carefully to make sure you can save the maximum amount possible.
The wealthy will also face some changes in tax breaks. The $5 million gift and estate tax exclusion is expiring at the end of 2012, along with several other Bush-era tax breaks for the wealthiest Americans.
This is the year to consult a tax professional to get the latest information on expiring tax breaks, no matter what your income level. Being prepared for next year’s taxes could be more important than ever before.