Tax Changes That
Taxpayers for 2012
Thanks to the passage of the American Taxpayer Relief Act
of 2012 (ATRA), many tax provisions that expired in 2011
retroactively extended (or made permanent) that
are of benefit to taxpayers filing 2012 returns this year.
Here are six of them:
1. Education-Related Tax Deductions
ATRA extended, through 2017 and retroactive to 2012, two
popular and widely used education-related tax benefits that
expired in 2011: the deduction for qualified tuition and
related expenses and the deduction for certain expenses of
elementary and secondary school teachers. Both are
above-the-line deductions, which means that they can be taken
before calculating adjusted gross income (AGI).
2. Limited Non-Business Energy
Non-business energy credits expired in 2011, but were extended
(retroactive to 2012) through 2013 by ATRA. For 2012 (as in
2011), this credit generally equals 10 percent of what a
homeowner spends on eligible energy-saving improvements, up to
a maximum tax credit of $500 (down significantly from the
$1,500 combined limit that applied for 2009 and 2010).
Because of the way the credit is figured however, in many
cases, it may only be helpful to people who make energy-saving
home improvements for the first time in 2012. That's because
homeowners must first subtract any non-business energy
property credits claimed on their 2006, 2007, 2009, 2010, and
2011 returns before claiming this credit for 2012. In other
words, if a taxpayer claimed a credit of $450 in 2011, the
maximum credit that can be claimed in 2012 is $50 (for an
aggregate of $500).
The cost of certain high-efficiency heating and air
conditioning systems, water heaters and stoves that burn
biomass all qualify, along with labor costs for installing
these items. In addition, the cost of energy-efficient windows
and skylights, energy-efficient doors, qualifying insulation
and certain roofs also qualify for the credit, though the cost
of installing these items do not.
3. Mortgage Insurance Deductible as
ATRA extended, through 2013 (and retroactive to 2012), a tax
provision that expired in 2011 that allows taxpayers to deduct
mortgage insurance premiums as qualified residence interest.
As such, taxpayers can deduct, as qualified residence
interest, mortgage insurance premiums paid or accrued before
Jan. 1, 2014, subject to a phase-out based on the taxpayer's
4. AMT "Patch" Made Permanent
The AMT 'patch" was made permanent by ATRA; however, exemption
amounts for 2012 and beyond are higher than in years' past and
are now indexed to inflation. For tax-year 2012, the
alternative minimum tax exemption amounts increase to the
- $78,750 for a married couple filing a joint return and qualifying widows
and widowers, up from $74,450 in 2011.
- $39,375 for a married person filing separately, up from $37,225 in 2011.
- $50,600 for singles and heads of household, up from $48,450 in 2011.
5. Transportation "Fringe Benefits"
Parity for transportation fringe benefits provided by
employers for the benefit of their employees expired at the
end of 2011; however, ATRA reinstated this parity retroactive
to 2012. As such, the monthly limit for qualified parking is
$240 and the benefit for transportation in a commuter highway
vehicle or a transit pass is $245 for tax year 2012.
6. State and Local Sales Taxes
Retroactive to 2012, ATRA extended (through 2013) the tax
provision that allows taxpayers who itemize deductions the
option to deduct state and local general sales and use taxes
instead of state and local income taxes.
If you have questions about these or other tax changes, please
call us. We'd be happy to assist you.
Financial Services at Sullivan & Company, CPAs
Grow leads our Financial Services Division and is here to
help you navigate your financial future. As an Investment
Advisor Representative, she is able to provide an
independent opinion on the investments you already own or
are considering buying.
We can structure a portfolio
based on your risk tolerance or we can help you decide how
to invest in your company 401(k) plan. We work with each
client to identify their concerns and to provide solutions
according to their situation.
is also experienced in company retirement plans. If you own
a business that does not have a plan; we can discuss your
options and set up a plan that fits your company.
If your business already has a
plan; we offer a free evaluation of the plan to ensure that
it is up to date and working well for you and your
Our goal is to provide personal, unbiased and independent
advice to help you make well-informed decisions about your
financial life and investments.
Contact Kathy Grow or Jordana Para to set up a free initial
consultation (301) 657-8080.
And as always if you have any questions about accounting or
investments and how they effect you or your business, please give
us a call at
(240) 316-3564. We
can help guide you in the right direction.
Remember you can call our offices if you have any
questions about these or any other accounting, tax,
financial planning or insurance related issues, at 301-657-8080.
Regards, Paul Sullivan, CPA
President, Sullivan & Company