“You’ve got to spend money to make money,” is a common saying, but “spend money now to claim tax breaks in April,” could be the mantra of some taxpayers this holiday season. The expiration of popular tax breaks might have some taxpayers making spring tuition payments and January house payments in December.
Tax breaks claimed by millions of students, teachers, homeowners and others for billions of dollars annually are set to expire Dec. 31. There is no guarantee that these tax breaks – which have been extended up to four times over the past seven years – will exist beyond tax year 2013. These are three of the more popular tax breaks set to expire:
· Tuition and fees deduction – in 2010, more than 2 million taxpayers claimed the tuition and fees deduction, resulting in a combined savings of $4.36 billion
· State and local sales tax deduction – in 2010, more than $16.4 billion was claimed by taxpayers who deducted state and local general sales taxes in lieu of state and local income taxes
o 57 million taxpayers reside in states with no individual income tax
· Deducting qualified mortgage insurance premiums as home residence interest – in 2010, 4.19 million taxpayers deducted $5.6 billion in mortgage insurance premiums.
Among the other tax breaks set to expire are the $250 educator expense deduction and the credit for certain energy-efficient home improvements. Taxpayers should consider evaluating their W-4 withholding and making quarterly estimated payments as needed to prepare for the loss of these tax breaks. Filing an amended return also is an option for taxpayers who were eligible for these tax breaks in 2010, 2011 and 2012, but didn’t claim them.