Changes With Tax Deductions
A tax deduction is not a tax credit. Instead, a tax deduction lowers a taxpayer’s gross income or tax base in
exchange for a certain behavior or action. Therefore, it normally reduces indirectly by lowering the amount
the taxpayer pays.
- Mortgage Insurance Premium Deduction Gone. Beginning January 1, 2011, taxpayers will no longer be allowed to deduct mortgage insurance premiums from their tax returns. Previously, homeowners who were paying insurance premiums for mortgage contracts that were signed after December 31, 2006 were able to take this deduction assuming they fell within the income cap of $100,000 for families.
- 179 Business Expense Deduction Lowered. For 2011 there are several business taxes that will be affected. The section 179 expense deduction that pertains to small companies and firms emerges as a prime example. Here, the maximum expenses deduction will see a significant decrease from $250,000. Of course, as with all tax deductions, other limitations apply.
- Student Loan Interest Deduction Limit Changes. For 2011, individuals or married couples can only deduct interest from the first 60 months of the repayment term. Moreover, the phase out income limits for claiming the deduction for both single filers and married couples will come down.