You can’t miss it, it’s been all over the news, the House will vote on the 2 month extension of 2% cut in employee social security contributions and are expected to pass it. Yeah! But what about the other expiring tax cuts?
There are over 2 dozen tax provisions that will expire on December 31, 2011. They include the $250 teacher supply deduction, mortgage insurance deduction, sales tax deductions, a slew of business credits and deductions and AMT. Yes, Alternative Minimum Tax is back on January 1st, 2012. At that time, the current patch is gone and we are back to lower exemptions and more taxpayers caught in the AMT trap. You remember AMT; our 2nd tax system that was created to make sure the very rich paid some tax by taking away certain deductions and exemptions. The tax that was not indexed for inflation or seriously reformed and can now be triggered by average income and deductions. Also expiring is the ability to use most non-refundable credits to offset AMT. There are a few credits which can still be used against AMT like the Adoption Credit, Child Tax Credit, Retirement Saver Credit and the Residential Energy Credit. These remain because their ability to offset AMT was written into the legislation for that credit.
Congress will now have to deal with AMT (and the other expiring cuts) in 2012 and make any extensions and patches passed retroactive to the first of the year. I’m sure given the current partisanship and that it’s an election year, we won’t see those changes until this time next year. While Congress might let some of the provisions expire, I seriously doubt that an AMT patch will be one of them. I also doubt that we’ll get a permanent fix to AMT. (Please, please, please prove me wrong Congress!)
So, this time next year we’ll be in the same boat waiting for Congress to fix and extend all the tax patches and tweaks. And we’ll be waiting to see if they will do anything about the extenders that will expire 12/31/2012 or postpone those to late 2013.