Several tax breaks are likely to be extended for 2012

A number of tax breaks that expired at the end of 2011 likely will be extended for 2012. Keep your eyes on these so you can take advantage of them if they become available. Some of these tax breaks pertain to businesses.

• $250 deduction for educators.

• Tuition and fees deduction.

• State and local sales tax deduction in lieu of deducting state and local income taxes.

• $100,000 tax-free transfer of IRAs to charity by those at least 70 years and 6 months old.

• Mortgage insurance premium deduction.

• Alternative minimum tax (AMT) exemption increased for inflation.

• Offset for AMT by nonrefundable personal credits.

• 100 percent bonus depreciation for business equipment. It’s now 50 percent, without the renewal.

• Parity for transit passes with free parking. The tax-free limit is now $125 per month for transit passes and $240 per month for free parking.

• 15-year recovery period for qualified leasehold, restaurant, and retail improvements.

• Enhanced deduction for donations of qualified easements.

• Enhanced deductions for businesses of certain items.

• Expensing of environmental remediation costs.

• Work opportunity credit, other than for veterans in 2012.

• Expensing of environmental remediation costs.

• Basis adjustment to stock of S corporations making charitable contributions of property

• Reduction of S corporation built-in gain period.

• Empowerment zone tax breaks.

• DC first-time homebuyer credit.

• Credit for certain nonbusiness (home) energy improvements.

Each year the deduction for educators is threatened, but it has been extended for the past several years. If this deduction is eliminated, educators may still take a deduction on their Schedule A under charitable donations, as most schools are non-profit. It is important to keep receipts for supplies and cash donated to the school.

The tuition and fees deduction has alternatives for claiming a deduction. The Lifetime Learning Credit allows for a credit of 20 percent of the first $10,000 of qualified education expenses. The maximum credit is $2,000 per return, regardless of the number of eligible students.

This credit phases out with an adjusted gross income of $51,000-$61,000 (single) or $102,000-$122,000 for married filing jointly. No credit is allowed if the filing status is married filing separate.

The American Opportunity Credit, formerly the Hope Credit, was extended through 2012. This credit allows for a maximum of $2,500, of which $1,500 is a direct credit on your taxes and $1,000 come to you as a refund. Credit is phased out at a modified adjusted gross income of $80,000-$90,000 for single and $160,000-$180,000 for married filing jointly.

For the American Opportunity Credit, an eligible student is one who is enrolled in a program leading toward a degree, certificate or other recognized post-secondary educational credential; has not completed the first four years of post-secondary education as of the beginning of the taxable year; for at least one academic period is carrying at least half of the normal full-time work load for the course of study the student is pursuing; and has not been convicted of a felony drug offense.

The state and local sales tax deduction is often taken by taxpayers who do not have state income taxes withheld from their income. If this deduction expires, taxpayers who normally track the sales taxes paid throughout the year would no longer be eligible for this deduction.

Watch for updates to these credits. Congress always delays making the decision regarding tax breaks until late in the year.

Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at tracystaxservice@yahoo.com