At the end of 2011, there are several tax provisions that are expiring. This may be the last opportunity to use these provisions between now and January 1, 2012.
Expiring Tax Provisions
Here are some of these tax provisions and ways to save money:
Sales Tax Deduction Instead of State Income Tax Deduction
This gives the tax payer an option to choose between deducting the state income tax paid or the state and local sales taxes paid.
This is most important for tax payers that live in a state with no income tax.
Others that are planning on making a purchase of a high price ticket item such as cars, boat, airplane, motor home, the sales tax will not be deductible in 2012.
Energy Efficient Home Credit
These items must be installed in your home by December 31, 2011. The tax credit is reduced to a total credit of $500, based on 30% of the cost of the materials. The 2011 tax credit is not available to every tax payer making energy efficient improvements in 2011.
If you have collected $500 or more of the credit 2009 or 2010, you will not qualify for the the 2011 credit.
This is an adjustment to income, so itemizing is not required. Each educator can deduct actual expenses for classroom supplies, up to $250. A couple of educators filing MFJ could deduct up to $500, but each educator would have had to spend their $250. There is no sharing of this deductible expense.
Electric Vehicle Credit for Low-Speed Vehicles, Motorcycles, and 3-Wheeled Vehicles
The credit for these qualified vehicles is of 10% of the purchase price up to $2,500. The credit for electric vehicle conversion kits will be expiring.
The itemized deduction of mortgage insurance premiums is set to expire at the end of 2011. Many tax payers are required to purchase this insurance in order to acquire a mortgage.
Tuition and Fees Deduction
This is an adjustment to income and will expire at the end of 2011. This is the deduction of qualified secondary education expenses up to $4,000 for AGIs up to $130,000 ($65,000 for single filers) or up to $2,000 for AGIs up to $160,000 ($80,000 for single filers).
Rollover from FSA (Flex Spending Account) or HRA (Health Reimbursement Account) to an HSA (Health Savings Account)
Through 2011, taxpayers have the ability to rollover funds from a Flex-Spending Account (FSA) or a Health Reimbursement Account (HRA) to a Health Savings Account (HSA). The HSA is only available if you have a High Deductible Health Plan.
Charitable Contributions from IRA
This is the provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire on December 31, 2011.
This provision allows the IRA owner to make this charitable contribution without having to recognize the income. Each IRA owner can contribute up to $100,000 per year to charitable organizations. The advantage is this can help avoid taxation of your SS benefit. It can also prevent a taxpayer from being charged the surcharge on Medicare B premiums.
This is not a complete list, but it is a list of some of the most popular tax items that will be expiring with 2011. Anyone of these may help limit your 2011 income tax.
Can you think of any other expiring tax provisions? How do you save money on taxes? Meet us in the comments!