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The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ("The 2010 Act") extended a number of popular individual tax deduction provisions through 2011. Note that many of these provisions expire at the end of 2011, and have not yet been renewed for 2012. WE'RE KEEPING OUR FINGERS CROSSED! These include:
1. The state and local sales tax deduction - extended for 2010 and 2011.This is an itemized deduction, and may be claimed in lieu of the deduction for state and local income taxes. For persons in states that do not have an income tax, consider purchasing "big ticket" items in 2011 to take advantage of this deduction.
2. The higher education tuition deduction - extended for 2010 and 2011.
This may not be used by married taxpayers filing separately, or if the taxpayer can be claimed as a dependent by another. Where available, a maximum deduction of $4,000 can be claimed, but there are income limits. These expenses include tuition payments for higher education (college, graduate school) paid for oneself, a spouse or a dependent. This deduction is available for payments made in connection with enrollment in an institution of higher education during 2011 or for an academic period beginning in 2011 or in the first three months of 2012.
3. The teachers' classroom expense deduction - extended for 2010 and 2011. This is an above-the-line deduction of up to $250 for out of pocket classroom expenses for elementary and secondary school teachers.
4. The 2010 Tax Act extended the eligibility for the refundable tax credit for children younger than age 17. The available $1,000 credit per child can continue to be claimed for 2011 and 2012. The availability of the credit is is phased out for higher incomes. The amount of the credit reverts to $500 after 2012. This credit is refundable to the extent of 15% of the taxpayer's earned income over $3,000.
5.The 2010 Act extended and modified the residential energy property credit. The credit is now available for 10% of the cost of energy efficient home improvements and the amount of residential energy property expenditures (insulation, exterior windows, doors, uses of certain energy efficient appliances). There is a $500 lifetime cap on the credit in the aggregate over prior years.
6. Other energy-related tax incentives were also extended by the new law. The deduction for energy efficient commercial buildings has been extended through December 31, 2013. The residential energy efficient property credit is extended through 12/31/2016.
7. The 2010 Tax Reform Act extended the American Opportunity Tax Credit (modified Hope Credit). The credit is 100% of the first $2,000 of qualifying education costs, plus 25% of the next $2,000 of such costs for a maximum credit of $2,500.
8. The employee social security tax rate (4.2%) is scheduled to expire at the end of 2011 and revert to the original 6.2%. President Obama has recommended an extension and enhancement for 2012. As of this writing, no bill has been approved by Congress. The employer tax rate for social security remains unchanged at 6.2%.
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