At the end of every year, dozens of existing tax codes either expire or are renewed by congress, making the tax planning process even more complicated. A report by the Joint Committee on Taxation found that 60 tax breaks expired at the end of 2011, and another 41 are schedule to run out at the end of 2012. While most of these tax breaks are insignificant to the common taxpayer, there are some that do apply to the general public.
Here is a list of a few important tax breaks that have either already expired or will expire by the end of 2012 if Congress chooses not to re-new them.
The Bush tax breaks- This category encompasses a variety of different cuts that were originally passed during the Bush administration and then extended by the end of 2010. A couple of the breaks included were lower rates on capital gains and dividends and lower marginal income tax rates.
The payroll tax breaks– This tax break cut the Social Security portion of the payroll tax, increasing the amount of after-tax income workers were able to take home in a rough economy. This provision expired at the end of 2011 but was extended for another two months as part of a Band-Aid agreement.
Deduction for state and local sales taxes- Under this provision, taxpayers were able to either deduct state income taxes or state sales taxes on their federal returns. In 2009, 10.3 million taxpayers took the sales tax deduction, while 33.8 million took the state income tax deduction. Even though this break expired at the end of 2011, many politicians are trying to get it extended because of its popularity.
The adoption credit- This tax credit, which is to expire at the end of 2012, helps adoptive parents cover the cost of adoption expenses such as attorney fees, travel expenses and court costs.
The IRA-to-charity rollover- This tax code allowed those 70.5 or older to donate up to $100,000 from their Individual Retirement Accounts to charity without paying any tax. This popular tax break expired at the end of 2011.