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9 Tax Breaks Set to Expire This Weekend

You Never Miss Them Until They're Gone


While Congress extended the Bush tax cuts through 2012, several popular temporary tax breaks, which have become known as “the extenders,” are set to expire on Dec. 31.

Don't fret, you'll still be able to use these deductions on your 2011 return, but this will be the last time unless Congress acts to extend these beneftis. The following nine tax breaks will disappear on New Year's Day.

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Educator Expenses


A teacher, aide, instructor, counselor, or principal in grades K-12 who has worked at least 900 hours during the school year can deduct up to $250 of classroom expenses for supplies, materials, books and software as an “adjustment to income.”

If both husband and wife are educators, each can claim up to $250 of expenses for a total of $500 on a joint return. They do not have to itemize to claim this deduction.

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Tuition and Fees


An “above the line” deduction is allowed for qualified undergraduate and graduate school tuition, fees and required course materials. Here, also, the taxpayer does not have to itemize to claim the deduction. It is available for up to $4,000 in expenses for joint filers with a Modified Adjusted Gross Income (MAGI) of $130,000 or less, and up to $2,000 for couples with a MAGI of between $130,001 and $160,000.

For single filers the MAGI cutoffs are $65,000 or $80,000. This deduction cannot be claimed on the returns of a married couple filing separately, or on the return of an individual who is the dependent of another taxpayer.

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State and Local Sales Tax


Taxpayers who itemize can elect to deduct state and local sales tax instead of state and local income tax.

A taxpayer can claim an amount from the Optional Sales Tax Tables based on state of residence, level of income and family size, plus any sales tax paid on the purchase of a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, off-road vehicle, plane, boat, motor home or materials purchased to build or improve a home – or the actual amount of total sales tax paid for the year on all purchases.

Check out the IRS sales tax deduction calculator to figure out if this is a smart move for you.

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Mortgage Insurance Premiums


Homeowners can deduct as “interest” on Schedule A private mortgage insurance (PMI) premiums paid on insurance contracts issued after 2006 in connection with the purchase of a personal residence.

The deduction is phased out as your adjusted gross income goes from $100,000 to $110,000 (or $50,000 to $55,000 for those who are married filing separately). Qualified private mortgage insurance premiums will be reported in Box 4 of the 2011 Form 1098.

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Rollover from IRA to Charity


Taxpayers age 70½ and older can transfer up to $100,000 tax-free directly from an IRA to a qualified church or charity. A charitable transfer can be used to satisfy the Required Minimum Distribution for the year.

The amount is not reported as income on Form 1040, and it cannot be deducted as a charitable contribution on Schedule A.

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Residential Energy Credit 


A lifetime credit of up to $500 is allowed on 10% of the cost of qualified energy efficiency purchases for a primary personal residence, such as insulation, exterior windows and doors, certain roofs, and high-efficiency heating and air conditioning systems. The cost of installation is also allowed for heating and cooling systems.

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Alternative Minimum Tax (AMT)


The AMT “patch” is in effect through 2011 only. Without action, the exemptions revert back to $45,000 for married filing jointly, $33,750 for single and head of household filers, and $22,250 for married filing separately designees.

The Child Tax Credit, the Child and Dependent Care Credit, the education credits, the Retirement Saver’s Credit, the Adoption Credit, and the Credit for Elderly of the Disabled will not be allowed to offset AMT for tax years 2012 and beyond.

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100% Bonus Depreciation


A 100% bonus depreciation allowance may be claimed for qualified business property acquired and placed in service in 2011.

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Section 179 Expensing Allowance


A piece of property that you have purchased for the use of your business can be expensed, but there are some stipulations.

The maximum amount of a qualifying asset purchase that may be expensed in full by a business under Internal Revenue Code Section 179 is $500,000.

To qualify, the property must be used more than 50% for business. In addition, up to $250,000 of certain qualified real property may be expensed under Section 179.

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