Expiring Tax Provisions

I thought you might find this quick listing of selected expired/expiring tax provisions useful. As you know, Congress could pass legislation at any time extending or revising any or all of these provisions.

* SOCIAL SECURITY TAXES. Employee’s share will increase
to 6.2% after 2012, up from 4.2%.

* INCOME TAX RATES. 2012 rates of 10%, 15%, 25%, 28%,
33%, and 35% will change to 15%, 28%, 31%, 36% and
39.6% for 2013.

* CAPITAL GAINS. Maximum long-term rate will increase
from 15% to 20% after 2012.

* DIVIDENDS. Top 15% rate will be eliminated; dividends
will be taxed as ordinary income with a top rate of

* CHILD TAX CREDIT. Current $1,000 credit per qualifying
child will be reduced to $500 after 2012.

* AMT. Exemption amounts for 2012 are $33,750 for
singles, $45,000 for couples, down from 2011 “patched”
amounts of $48,450 for singles and $74,450 for couples.

* ESTATE TAX. Top 2013 rate will increase to 55% (up
from 35%); exclusion amount will be reduced to
$1,000,000 (down from 2012 amount of $5,120,000).

* DEDUCTIONS & EXEMPTIONS. After 2012, higher-income
taxpayers will again lose a portion of itemized
deductions and personal exemptions.

* DEPRECIATION. Section 179 expensing limit will be
reduced to $25,000, with a total qualifying property
limit of $200,000, down from 2012 levels of $139,000
and $560,000 respectively. 50% bonus depreciation
will expire.

* EDUCATION. Education savings account contribution
limit will be $500, down from 2012 limit of $2,000.
Expanded American Opportunity Credit will expire and
be replaced by prior Hope Credit.

* TAX EXTENDERS. Tax breaks that expired after 2011:
Teachers’ classroom expense deduction, state and local
sales tax deduction, tax-free charitable IRA
distributions for those70 ? and older, higher
education tuition deduction, business R&D credit,
15-year depreciation for leasehold improvements and
restaurant property.

The uncertainty in the tax rules makes the approaching tax filing season more challenging than usual.

David Bradsher, CPA