Expiring Tax Provisions for 2011

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There are quite a few tax provisions that will be expiring at the end of 2011 – nowhere near the number of provisions that were set to expire at the end of 2010 (many of which were subsequently extended), but still there are quite a few sun-setting this year.

Listed below are some of the major provisions that will expire at the end of 2011 that will affect individual taxpayers.

Charitable Contributions from IRA The provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire as of 12/31/2011.  This provision allows the IRA owner to make this charitable contribution without having to recognize the income – which could have a profound effect on the taxpayer’s return.  Remember, this one expired once before, at the end of 2009, but was extended retroactively through the end of 2011, so it’s possible it could be extended again.

Educator Expenses The actual expenses that teachers incur for classroom supplies, mileage and the like in support of the education process, up to $250 per spouse.  Neither spouse can deduct more than $250 of his or her own qualified expenses.

Electric Vehicle Credit for Low-Speed Vehicles, Motorcycles, and 3-Wheeled Vehicles The credit for these qualified vehicles, of 10% of the purchase price up to $2,500, is available through the end of 2011, after it was extended at the end of 2010.  The credit for electric vehicle conversion kits is also expiring at the end of 2011.

Energy Efficient Home Credit The credit for an energy efficient home and for energy efficient improvements, reduced to a total credit of $500, based on 30% of the cost of the materials, is set to expire at the end of 2011.  If $500 or more of the credit has been used in 2009 or 2010, the 2011 credit is not available.

Mortgage Insurance Premium Deduction The itemized deduction of mortgage insurance premiums is set to expire at the end of 2011.

Rollover from FSA or HRA to an HSA  Up to the end of 2011, taxpayers have the ability to rollover funds from a Flex-Spending Account (FSA) or a Health Reimbursement Account (HRA) to a Health Savings Account (HSA).  The HSA is only available if you have a High Deductible Health Plan (HDHP), although you could have a “grandfathered” HSA from an earlier HDHP without current coverage by the HDHP.

Sales Tax Deduction Instead of State Income Tax Deduction Also expiring at the end of 2011 is the ability to utilize state sales tax instead of state income tax as a deduction on your Schedule A.  This will make a huge difference for folks that live in states with low or no state income tax – and folks that are planning the purchase of high-ticket items subject to sales tax, such as motor homes, boats, and luxury vehicles.

Tuition and Fees Deduction Once again set to expire at the end of 2011 is the deduction of qualified secondary education expenses up to $4,000 for AGIs up to $130,000 ($65,000 for single filers) or up to $2,000 for AGIs up to $160,000 ($80,000 for single filers).