Statistics Script

Search This Blog

Tuesday, February 14, 2012

Individual Income/Deductions

Individual Income/Deductions

The additional tax on distributions from a Health Savings Account for non-qualified medical expenses has increased from 10 percent to 20 percent. The definition of qualified medical expenses has also narrowed and no longer includes non-prescription drugs (except for insulin). For example, Tylenol and Advil only qualify for tax-free status if prescribed.

Medical/moving expenses. The IRS updated the mileage rate for calculating the deduction of expenses incurred for operating an automobile for qualifying medical or moving purposes for 2012. For the first half of 2011, the rate was 19 cents per mile; then, to reflect increasing transportation costs, the IRS increased the rate to 23.5 cents for the second half of the year.

Roth IRA conversions. Congress enacted a special provision allowing taxpayers converting their traditional IRAs to Roth IRAs in 2010 to defer the income until 2011 and 2012. Taxpayers who rolled over this income in 2010 must report the first half of the income in 2011 and the second half in 2012.

Expired provisions. Tax provisions that have now expired include deductions for teacher/educator expenses and the tuition deduction (once reported on Form 8917, Tuition and Fees Deduction ). The state and local sales tax deduction, an itemized deduction that taxpayers can take in lieu of their state and local income taxes, expired at the end of 2011. Although taxpayers may claim it on their 2011 returns, they cannot count on it for 2012. Congress, however, may retroactively extend the deduction, as it has in the past.

No comments: