2012 year-end tax tips: 4 credits due to expire
(MoneyWatch) With the end of the year rapidly approaching, now is a good time to review some great benefits that Uncle Sam is making available for this calendar year. Before you pull out last year's returns as a guide for this year, take note of the following benefits which expired and/or have not yet been repealed and will not be available for tax year 2012, according to IRS Publication 505:
- Personal tax credits allowed against regular tax and alternative minimum tax
- Work opportunity tax credit
- Deduction for state and local general sales tax
- Deduction for qualified tuition and related expenses
- Deduction for educator expenses
- Non-business energy credits
- Credit for tax credit bonds
- Qualified electric vehicle passive activity credit
- Enhanced adoption credits
4 credits due to expire in 2012
Tax credits are even better than deductions because they lower your taxes dollar for dollar, instead of being calculated based on your tax bracket.
1. The Child Tax Credit is up to $1,000 for each qualifying child who was under the age of 17 at the end of 2012. This credit can be claimed in addition to the credit for child and dependent care expenses, but phases out for married couples who earn over $110,000 and single filers who earn more than $75,000. (Details are in IRS Publication 972.)
2. The Child and Dependent Care Credit is available if you pay someone to care for your dependent who is under age 13, so that you can work or look for a job. The credit is 20 to 35 percent of your child-care expenses, up to $6,000. The size of your credit depends on your income. This credit will be reduced significantly next year. (Details are in IRS Publication 503.)
3. The Earned Income Tax Credit is a refundable credit for married couples filing jointly with 2012 earned income under $50,270 and singles who made less than $45,060. The more children you have, the more money you receive. Your income and family size determine the amount of the credit, but the maximum credit is $5,891 this year. The income thresholds for this credit have increased over the past decade, and the maximum credit has increased since the recession. Next year, both phaseout limits and credit amounts will revert back to lower levels. (Details are in IRS Publication 596.)
4. The American Opportunity Tax Credit was set to expire at the end of 2010, but was then extended for an additional two years through December 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit for higher education expenses available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. The full maximum annual credit of $2,500 per student is available to individuals, whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. Year-end tip: Consider paying for next semester's tuition before year-end.
