A Number of Income Tax Deductions and Credits Set to Expire

You can save money on your 2011 taxes with these soon-to-be-extinct tax breaks!

Think it’s too late to save on your 2011 taxes? Think again! Here are six deductions and tax credits that will be gone by the end of the year:

• Energy Efficiency Tax Credit

Making energy-efficient upgrades to your home isn’t just a great way to cut down on heating and cooling costs, it can get you a tax credit too.

If you add more insulation to your attic or buy an energy-efficient appliance, among other possible improvements, you can apply for a tax credit. For a full list of qualifying improvements, refer to the Energy Star website.

The tax credit is worth 10% of the cost of these improvements.

But note that there is a $500 lifetime limit on this credit, so if you’ve taken advantage in previous years, you may not be able to do so again.

Congress has made some changes to the rules governing these credits for 2011. Go here for a full summary of the changes.

• Higher Education Deduction

Those paying tuition or fees for higher education may be able to get an above-the-line deduction of up to $4,000.

Individuals with an Adjusted Gross Income less of than $65,000 (and couples with an AGI less than $130,000) can take advantage of the full credit. Individuals making less than $80,000 (and couples less than $160,000) will have to settle for a $2,000 deduction.

Note also that you are not eligible for the deduction if you claim any education tax credits.

The deduction ends on January 1, so if you have educational expenses for 2012 that can be paid now, it’s best to do so before the deduction expires.

• Mortgage Insurance Premium Deduction

2011 is the final year homeowners with an AGI of less than $109,000 can deduct the cost of mortgage insurance premiums on their first and/or second home.

• Qualified Adoption Expenses Tax Credit

Parents can claim a tax credit of $13,360 per adopted child for qualified adoption expenses. If an employer paid for the adoption expenses, the parents can still exclude $13,360 from their gross income. Note that beyond certain income levels the credit phases out.

• Sales Tax Deduction

Also expiring at the end of 2011 is the deduction that allows people who live in states without an income tax to deduct sales and use taxes instead of state and local income taxes.

Those planning a big purchase should buy now!

• Teacher Classroom Materials Deduction

Teachers and other school employees who spent at least 900 hours teaching over the last year can claim an “above-the-line” deduction of up to $250 of expenses for books and classroom supplies.

This deduction too is about to expire. Teachers may want to head to the teacher store now before the end of the year.