One of the first things many of us learn about the tax code is that it is always changing. New tax breaks appear, and tax breaks you have grown used to expire. Indeed, there are a number of tax breaks that you might be enjoying now that have expiration dates on them.
Remember when the payroll tax cut expired? Even though things were just going back to normal, too many taxpayers used to the lower payroll taxes it felt like a tax hike. You might feel the same way, too, when the following 4 tax breaks come to an end along with 2013.
1. Teacher Classroom Cost Deduction
For the last few years, teachers have been enjoying an above-the-line deduction that offers a tax benefit of up to $250 when they spend money out of pocket on classroom supplies. This deduction applies to primary and secondary school teachers. The fact that it is an above-the-line deduction means that there is no need to itemize. Many educators have become used to this tax deduction, and losing the benefit after 2013 closes might feel like a tax increase.
If you are a teacher, and you haven’t spent $250 on supplies yet this year, it might be worth it to look ahead to see what you need in the early months of 2014 in order to get the most out of the deduction before it disappears.
2. PMI Premiums
If you don’t put down 20 percent of your home’s value when you get a mortgage, many lenders require you to pay for private mortgage insurance (PMI) in order to protect them if you default. You might be used to receiving this deduction, but after this year, you won’t be able to take it anymore.
Mortgage interest will still be available as a deduction for those who itemize, but the PMI premiums paid will no longer be tax-deductible.
3. Public Transit Tax Break
Transit benefits have been offered, allowing workers to use pre-tax dollars for the purchase of public transit, such as rail and bus passes. Right now, it’s possible to get a deduction for up to $245 per month spent on public transportation. However, with the end of the year, the amount eligible for the deduction drops to $130 per month. (If you pay for parking, though, you can still deduct up to $245 per month on parking.)
4. State and Local Sales Tax Break
If you itemize, you can deduct the amount you pay in state taxes from your federal bill. However, not everyone lives in a state that collects income tax. If your state doesn’t collect income tax, it is possible, at least through the end of 2013, to deduct your sales tax. Many people have become used to being able to deduct these taxes, but the ability is set to disappear.
Congress Could Change Things
Of course, some of these tax breaks might be extended. Some of the tax breaks disappearing this year have been extended in the past. But it’s never a sure thing. Be prepared to see one (or more) of the tax breaks you have been enjoying disappear. If you have come to rely on a particular tax break, now is a good time to consult with a tax professional to find out what you can do next year to offset the new situation.