Federal Tax Provisions Extended by the Tax Relief Extension Act

Income Tax Service

Terry Hough

Expired 2012 Federal Tax Provisions Extended by the Tax Relief Extension Act

January 3, 2013

Late on January 1, 2013, Congress passed HR 8 (Tax Relief Extension Act) which extended almost all of the Federal tax provisions that had expired at the end of 2011 and 2012.

Although the Tax Relief Extension Act contains many individual, business, and energy tax provisions that were extended or modified, the following are the ones that will have the most impact on taxpayers filing their 2012 Federal returns this coming filing season.

Alternative Minimum Tax (AMT)
The Alternative Minimum Tax (AMT) provisions were permanently extended as follows:

The exemption amount will be indexed for inflation each year. For 2012 the exemption amounts are:

Single/Head of Household: $58,600
Married Filing Joint: $78,750
Married Filing Separate: $39,375

All personal nonrefundable credits may be used in calculating the AMT. This also means that the order these credits are taken against regular tax will remain as they were.

Individual and Business Provisions
The following individual and business provisions were extended and will apply to Tax Years 2012 and 2013:

$250 Educator Expense Deduction – Form 1040, line 23
Tuition and Fees Deduction – Form 8917 and Form 1040, line 34
Itemized Deduction for Sales Tax – Schedule A, line 5
Nonbusiness Energy Property Tax Credit reported on Form 5695, Part I
15 year straight line depreciation allowed for qualified leasehold restaurant and retail improvements
Tax-free distributions from IRAs for charitable purposes
Contributions of capital gain real property made for conservation purposes (50% limitation applied instead of 30% limitation)

Section 179 Expense
The following Section 179 provisions were extended and will apply to tax years 2012 and 2013:

Maximum deduction: $500,000
Maximum cost before the limit is reduced: $2,000,000
Qualified Real Property category which includes qualified leasehold improvements, qualified restaurant property and qualified retail improvement property which has a Section 179 expense limit of $250,000.

Adoption Credit
The portions of the Adoption credit that made it a refundable credit and increased the credit amount were not extended. Thus the adoption credit reverts back to being a nonrefundable credit with any excess being allowed to be carried forward for five years. The maximum credit for 2012 will be $12,650.

Federal Provisions That Were Not Extended
The following Federal provisions were not extended and thus are not applicable for 2012 Federal returns:

5 year depreciation for farming business machinery and equipment
DC First-time homebuyers tax credit

Availability of Form 1040 Instructions and Publication 17
Due to the lateness of the passage of this tax bill and the uncertainty surrounding the above extender provisions the IRS has not yet released the Form 1040 instructions or Publication 17. Now that it has passed, the IRS should be releasing them in the near future.

Several forms, like the Form 1040 adn Form 1040, Schedule A, will have to be revised and re-released also. I would expect this to take up to two weeks.

And, of course, software providers and the IRS will need time to make revisions to their software and perform thorough testing of the changes.

This possible could delay the filing of certain returns. The IRS has not yet made any formal announcement of any definite delays.

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All information provided is general in nature and intended to create awareness, not to address the specific circumstances or concerns of any individual or entity. Although we try to provide correct and timely information, we cannot guarantee the accuracy of any information or that such information will continue to be accurate in the future due to the changing nature of the tax laws. Before acting on any of the information provided here, you should consult with a professional advisor who knows all of the unique facts and circumstances pertinent to your particular situation.