Expired Individual Income Tax Provisions as of December 31, 2011

Even the most ardent supporter of a simplified tax code would feign excitement over the expiration of the following tax provisions as of December 31, 2011.  The AMT patch will most likely be extended, particularly in an election year.  Many of the provisions are widely used such as the deductibility of state and local sales tax, deduction for certain teacher expenses, and the mortgage insurance premiums deduction.

1) The "AMT patch" will need patching in 2012.  The AMT exemption reverts to its previous statutory amounts.  IRC Sec. 55(d).  Personal credits allowed against regular tax and AMT expires as well.  IRC Sec. 26(a), although certain exceptions apply.  The patch will no doubt be extended as it would subject significantly more taxpayers to the AMT.  The lack of personal credits against the AMT and regular tax would disallow the benefit of some credits for certain taxpayers.

2) The deductibility of state and local sales tax instead of state income tax on Schedule A expires.  IRC Sec. 164(b).  For the few sales tax only states, this will create a noticeable increase in taxes.

3) The deduction of up to $250 for certain elementary and secondary school teacher expenses.  IRC Sec 62(a)(2)(D).  The teacher's unions will no doubt find this annoying.

4) Deductible mortgage insurance premiums as interest.  IRC Sec 163(h).  With many individuals struggling to make payments on homes with little or no equity, this certainly won't help.

5) The tuition and fees deduction (above-the-line) of up to $4,000 for qualified tuition and related expenses.  IRC Sec. 222.  The name and amount of the education credits continue to change, which makes longer term planning more difficult. 

6) Tax free treatment of charitable distributions from IRAs.  IRC Sec. 408(d)(8).  Mitt Romney might want to keep this one around for his supersized IRA.

7) Several other less common provisions including:

a) Transit pass exclusion from income will no longer be equal to the parking benefit exclusion.  IRC Sec. 132(f).  The amount excluded from income falls from $230 per month in 2011 to $125 per month in 2012.

(b) Expanded adoption credit, IRC Sec. 36C, and adoption assistance program IRC Sec. 137 amounts.

(c) District of Columbia first-time homebuyer credit.  IRC Sec. 1400C.

d) Nonbusiness energy property credit.  IRC Sec. 25C.  This provision already took a substantial cut in 2011.  Many of the eligible items are too expensive to justify purchasing them to receive the credit such as furnaces (afu >=95) and hot water heaters (tankless only) for two examples.  It's easier to get a rebate from your local utility company.  The Energy Star websites has an easy to read comparison of the changes from 2011 to 2012.   

e) 100% exclusion of gain on sale of certain small business stock.  IRC sec. 1202(a).