It's tax season. Although keeping tabs on the details of income and expenses can be a little dreadful, filers have plenty to look forward to when Uncle Sam hands out that refund. There are countless deductions to take advantage of to lower your tax burden -- and they're not just for the uber rich. From buying a home to putting your kids in college, taxpayers can deduct or receive credit on many items.
But leverage the opportunities now. Many popular tax breaks are set to either expire or scale back as the government's stimulus package from 2009 winds down. With the help of the Tax Institute at H&R Block, Fortune lists five tax favored breaks approaching extinction.
Get 'em while they last.
energy savers
For a while, it literally paid to install energy-efficient heating and cooling equipment in your home.
As part of the 2009 government stimulus package to boost the economy, Congress expanded the non-business energy property credit, where purchases of certain energy-efficient home improvements made during 2009 and 2010 would be eligible for a credit of 30% or up to $1,500. The tax break was especially loved by home improvement stores like Lowes and Home Depot.
Starting this year, however, this break will be scaled back to pre-stimulus levels, where 10% of everything from energy-saving insulation, roofing and the like can be deducted, or a maximum of $500.
homeowners
Count on Uncle Sam to continue supporting the American Dream of homeownership, depending on how you pay for it.
In 2007, Congress approved a tax deduction targeted at first-time homebuyers and middle-income taxpayers who put less than 20% down on their loans. Because of the smaller down payment, borrowers are required by law to buy mortgage insurance to protect lenders from defaulting loans. While insurance raises the costs of monthly mortgage payments, homeowners can deduct the expense, saving taxpayers an average of $350 to $400 annually, according to the Mortgage Insurance Companies of America, a Washington DC-based trade group.
Congress has voted to extend the tax through end of 2011. After that, it's anyone's guess if lawmakers will decide to extend the break.
parents with kids in college
Sending your first-born to college? How about your second, third and fourth?
The American opportunity tax credit, which was approved in 2009 as part of the government's stimulus package, has helped take some of the sting out of college tuition and fees, especially for those with more than one student in school. The break gives taxpayers a credit of up to $2,500 per student each year for each of four years for college. To gain the full benefit, household income for a couple must be no more than $160,0000; for singles, $80,000.
The credit is expected to expire next year, although the Obama administration is pushing to make it a permanent benefit for taxpayers.
workers
Most American workers saw a bump in their paychecks at the start of this year thanks to a bill that gives them a yearlong discount on their payroll tax in 2011. Most workers typically pay 6.2% of their salaries, or up to $106,800, toward Social Security. But the new legislation, part of a larger tax cut package, will reduce that to 4.2%.
With more cash to take home, the Obama administration hopes the savings will encourage workers to spend more and help keep the economy chugging along. It might be too early to say how the tax break is performing but some already expect --given the rise in food and gas prices so far -- it might not do much to boost real spending.
The tax holiday is scheduled to expire next year.
small business owners
With a slow economic recovery, small business owners might find it hard these days to justify the expense of buying up new computers, copiers and other equipment. But Uncle Sam is encouraging small businesses to do just that under a change made in 2010 of a federal program that allows businesses to write off capital investments.
It used to be that businesses would have to amortize these costs, deducting them over a number of years. With new legislation passed last year, business owners now receive a chunk of cash all at once from expenses made through the end of this year. The idea is that they would then use it to help stimulate the economy.
But buy your office equipment now. After 2011, business owners will have to spread those deductions out over several years again.