Friday, January 1, 2010

Congress Lets 50 Tax Breaks Expire at the End of 2009

If you were not paying attention you would not have noticed, but congress along with doing nothing about the estate tax at the end of 2009 let 50 tax breaks expire.  These tax breaks are traditionally extended at the end of each year by congress.  However, this year the congress was so tied up in other issues like the health care bill that they did not bother to pass an extender bill.  This has happened before and when it did it took congress until October to pass an extender bill retroactive to January 1.  However, there is no certainty that this will happen again, and if it does it will most likely not extend all 50.  Congress is in a budget crisis year and they will be looking for areas to increase revenue, so watch out. 

Below is a list of items that were not extended that are most like to affect the most taxpayers:

  • The annual Alternative Minimum Tax patch.  If this is not extended, over 4 million additional taxpayers will be snagged by the Alternative Minimum Tax.
  • Research Tax Credit.
  • Deduction state and local sales tax for those that itemize.
  • The $1000 property tax deduction allowed for those that do not itemize.
  • The $4000 deduction for college tuition.
  • The $250 deduction for teachers that buy their own supplies for classrooms.
  • The provision that allows those 70 1/2 or older to transfer up to $100,000 from an IRA to a charity.

The uncertainty of these provisions being extended will make it difficult to determine estimated tax payments for 2010.  If taxpayers assume that the deductions will be extended and they are not, they could be subject to penalties for not paying enough estimated taxes.