The RUNDOWN; Tax Breaks to Grab Before They Expire: Don’t miss out on dozens that expire in 2013
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The Rundown |
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Tax Breaks to Grab Before They Expire: Don’t miss out on dozens that expire in 2013
(Wall Street Journal)
Get ’em while you can. Fifty-five temporary tax provisions are set to expire at the end of 2013.
The full list, published by the staff of Congress’s Joint Committee on Taxation, includes many benefits you might not have heard of, such as the three-year depreciation rule for racehorses two years or younger, a write-off for film and TV productions made in the Mississippi Delta Region and an American Samoa development credit.
There are also more than a half-dozen widely used tax breaks on the list.
Several have lapsed before but were reinstated retroactively, causing some taxpayers to scramble at the last minute.
The individual retirement account “charitable rollover” provision-cherished and used by many donors aged 70½ or older-has expired three times in the past seven years. It allows IRA owners who must take annual withdrawals to contribute up to $100,000 of their payout directly to qualified charities such as churches, schools or other groups.
There’s a tax advantage here, because the donations lower adjusted gross income. That, in turn, helps reduce certain Medicare premiums or taxes on Social Security payments.
Lawmakers reversed the 2010 and 2012 rollover expirations so late that some people weren’t able to make IRA donations for those years. That could happen again this year, assuming Congress gets around to enacting an extension, says Jackie Perlman, a specialist at H&R Block’s Tax Institute.
She points out that “fiscal cliff” legislation enacted in January has already clarified pressing issues about tax rates and the alternative minimum tax, so “there’s not as much pressure on Congress to act” on the IRA issue and other expired items.
In the meantime, the IRA charitable rollover is good until the end of this year. Here are other expiring provisions to use or lose.
State sales-tax deduction. To deduct state sales levies, taxpayers must forgo taking a state income-tax deduction. This write-off is used mostly by 57 million people residing in states without an individual income tax, such as Texas and Florida.
Tuition and fees deduction. This benefit allows a deduction of up to $4,000 per year for qualified expenses for postsecondary education. This year, it isn’t available to most joint filers with more than $160,000 of adjusted gross income (or half that for singles), and it can’t be combined with most other tax benefits for education or claimed by a dependent.
Mortgage-insurance premium deduction. This write-off allows home buyers who had to get mortgage insurance-often because their down payment was too small-to deduct the premiums along with their mortgage-interest payments, as long as the insurance contract was issued after 2006. It phases out completely for most couples with adjusted gross income above $109,000. In 2010, more than four million taxpayers deducted a total of $5.6 billion in mortgage-insurance premiums. For more details, see IRS Publication 936.
This morning’s Wall Street Journal reminds of the tax break deadline that’s looming. Talk to any CPA to localize. They’ll all be busy these next few weeks making sure that individual and corporate clients are taking advantage of the dozens of tax breaks set to expire in 2013. But there are also lots of tax breaks you don’t want to claim because they’re almost sure to trigger an IRS audit. IRS Audit Red Flags: The Dirty Dozen One of our clients is a CPA who specializes in helping clients avoid an IRS audit. He can talk about what you should and shouldn’t be doing between now and January 1st.
Joe Mastriano CPA — IRS Audit expert 713-774-4467 support@taxproblem.org
Joe is also available for Skype interviews.
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