Business and Individual Federal Tax Provisions Expiring After 2011

A number of federal tax provisions for both businesses and individuals have expired and have not yet been reinstated by Congress. The payroll tax cut for employees (2% of the employee share of FICA) has been extended through February 2012. While not a complete lock, it seems unlikely Congress will fail to extend that tax cut through the rest of 2012. Following are some of the tax deductions and credits that are not quite so certain to be reinstated.

Business provisions: The following tax deductions/credits are eliminated effective January 1, 2012:

• Bonus depreciation is reduced to 50% of new, first-use assets acquired in 2012.
• The Section 179 expense limit is reduced to $139,000 (asset acquisition phase-out reduced to $560,000).
• The 15-year asset life for restaurant renovations and tenant improvements is eliminated.
• The Research & Development Credit is eliminated.

Individual provisions: The following tax deductions/credits are eliminated effective January 1, 2012:

• Itemized deduction for state sales tax in lieu of state income tax.
• College tuition deduction.
• $250 above-the-line deduction for teacher’s classroom expense.
• Donations of up to $100,000 per year to qualified charities directly from IRA accounts for individuals over age 70 ½.
• $500 credit for energy efficient home improvements (doesn’t include solar energy credits).
• Deduction for principal residence mortgage insurance premiums.
• AMT provisions also revert to pre-Bush era tax cut levels, so the higher exemption amounts and the offset for personal tax credits are currently no longer in effect.

Most of the above provisions are expected to be reinstated, however there are no guarantees with Congress. We may not see action on these issues until after the November 2012 elections.