Tax Breaks You Can’t Count On for 2012

By David Muhlbaum
Kiplinger’s Money Power

       You’ll face a higher tax bill when you fill your 2012 return next spring if Congress doesn’t act to revive this series of expired tax breaks:

• Alternative minimum tax patch. 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 $22,500 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.
    
• Higher mass transportation benefit. This one is of particular interest to straphangers, van riders and other users of public transit. A 2009 federal stimulus provision raised the maximum an employee could receive for transit, tax-free, from $120 to $230. With the expiration of this break, the maximum for 2012 dropped to $125. Employees who’ve asked to have an amount higher than that withheld from their paycheck to cover their total commuting costs will see their net pay shrink.
    
• Deduction for direct IRA payouts to charity. Retirees who are 70 1/2 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.
    
• Write-offs for state sales taxes. This break allowed you to deduct either state income tax or state sales tax from your federal taxable income.
    
• Out-of-pocket teacher’s materials. Teachers were able to deduct up to $250 for classroom supplies they paid for themselves, even if they didn’t itemize.
    
• Tuition and fees deduction. Taxpayers (up to certain income limits) who can’t claim the more advantageous American Opportunity or Lifetime Learning credits can no longer reduce taxable income by up to $4,000 for tuition and other qualifying educational expenses.
    
• Mortgage insurance premium deduction. Homeowners who don’t exceed certain income limits have 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.

       Congress may 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.
       Editor’s Note: David Muhlbaum is an online editor at Kiplinger.com. Send your questions and comments to moneypower@kiplinger.com. And for more on this and similar money topics, visit www.Kiplinger.com.