Coming Tax Changes Will Affect Small Business Owners

Saturday, June 30, 2012 @ 09:06 AM
Author: Peter Brehm

While it is hard to eliminate a tax, it seems less difficult to eliminate deductions and increase tax  rates.   There were a number of significant change that are effective this year, and even more that will impact you in 2013.

Among tax provisions that expired at the end of 2011 are the following:

  1. The so-called “AMT patch.” As result, an estimated 27 million more taxpayers are subject to the Alternative Minimum Tax this year.
  2. The deduction for state and local sales taxes.  About 11 million taxpayers claimed this deduction last year.
  3. The deduction for mortgage insurance premiums.  About four million taxpayers recently claimed this deduction.
  4. A provision allowing persons over age 70-1/2 to make tax-free withdrawals from their Individual Retirement Accounts (IRAs) to make charitable contributions.

The IRS believes that Congress is likely to extend many of these and other expired provisions retroactive to January 1, 2012, but neither taxpayers nor the IRS know for certain what will happen and therefore cannot make plans.  For example, a home-buyer trying to decide whether to utilize a loan package that includes mortgage insurance now lacks important information.  So does a pensioner trying to decide whether to tap his IRA to make a charitable donation.

An even larger number of provisions are set to expire at the end of 2012, including the Bush-era cuts in marginal tax rates, reduced tax rates on dividends and long-term capital gains, various marriage penalty relief provisions, certain components of the child tax credit, the earned income tax credit, and the adoption credit, and the moratoria on the phase-outs of itemized deductions and personal exemptions.

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