When the Bush tax cuts were passed into law, they were passed as a temporary tax code and were set to expire in 2009. These cuts include many of the tax deductions and tax credits that are claimed every year. However, when the Obama administration took over after the Bush administration, they did not remove these temporary tax cuts. Instead, through a negotiation with the Republican side of Congress, these tax cuts were extended so as to expire in 2012. There are therefore, some temporary tax reliefs that you can only take advantage of until 2012, as they will no longer be available after that – unless Congress decides on another extension. Four of these temporary tax reliefs are explained below:
1. Adoption Credit
The Adoption Credit is a tax credit that is available to people who adopt a child or children. The credit is used to help the adopters to recover some of the costs for adopting children. For the tax year 2011, the tax credit cap for adopting a child is $13,170.00. Households with more than one child can claim a credit for each child. What is better for the 2011 tax year is that the Adoption Credit is refundable. This means that if a balance remains after the credit is used up against due taxes, the IRS will provide a tax refund. The credit is only available to taxpayers who have an income of less than $182,520.00. To be entitled for this credit, you will need to file IRS Form 8839, attaching the support documentation of bills related to the adoption process. For children with special needs, the adopter can claim the maximum credit without producing any support documentation.
2. American Opportunity Credit
Under the American Opportunity Credit, taxpayers who have incurred higher education expenses (tuition only) can now claim a tax credit against the expenses with a cap of $2,500.00 annually. The credit is available for taxpayers who have an income of $90,000.00 and below (and for those who file jointly, there is an income cap of $180,000.00).
3. Charity IRA Rollover
The Charity IRA rollover is a tax opportunity available to taxpayers who are 70.5 years and above. The taxpayers can contribute their IRA funds to a qualifying tax-exempt charity up to a cap of $100,000.00 with no tax implications. This tax break is only available until end of 2011 and therefore, those seeking to take advantage can only do so within this time.
4. Health Insurance Deduction
For those in self-employment, the tax code provides a tax savings for the health insurance of you and your whole family. A taxpayer can now deduct the premiums paid for the health insurance policies of him or herself and his or her spouse and children. For the children, the tax relief allows for the deduction of premiums for children aged 27 years and below, even if they are not dependents.