Provisions NOT extended by the 2010 Tax Relief Act


While the 2010 Tax Relief Act extends a number of tax breaks that were scheduled to expire in 2009 or 2010, it is important to know which expired 2009/2010 provisions were not extended by the 2010 Tax Relief Act or other Acts. Here is a listing of selected non-extended provisions affecting individuals and small businesses.  Listed first are provisions that expired in 2009, and then provisions that expired in 2010. For each expired provision, the consequence(s) of the failure to extend the provision is indicated, as well.

Expiring in 2009

  1. Work opportunity tax credit with respect to certain individuals affected by Hurricane Katrina for employers inside disaster areas – The credit doesn’t apply to “Hurricane Katrina employees” hired after Aug. 27, 2009.
  2. Alternative motor vehicle credit for qualified hybrid motor vehicles other than passenger automobiles and light trucks – The credit has expired, effective for purchases after Dec. 31, 2009.
  3. Additional standard deduction for State and local real property taxes – For tax years beginning after Dec. 31, 2009, the real property tax standard deduction isn’t in effect.
  4. Exclusion of unemployment compensation benefits from gross income – For tax years beginning after Dec. 31, 2009, the partial exclusion for unemployment benefits isn’t in effect.
  5. Deduction for State sales tax and excise tax on the purchase of motor vehicles – Effective for purchases after Dec. 31, 2009, the deduction is no longer in effect.
  6. $500 per-casualty floor on deduction for casualty and theft losses – For tax years beginning after 2009, the per-casualty floor is $100.
  7. Waiver of 10%-of-AGI limit on personal casualty losses for “federally declared disasters” in 2008 and 2009 – The exception to the 10%-of-AGI limitation for disaster losses doesn’t apply to federally declared disasters occurring after Dec. 31, 2009.
  8. Five-year depreciation for farming business machinery and equipment – Most machinery and equipment used in a farming business and placed in service after Dec. 31, 2009, is 7-year recovery property.
  9. Special depreciation allowance for qualified disaster property – This provision doesn’t apply to property placed in service in a disaster area with respect to a federally declared disaster occurring after Dec. 31, 2009.
  10. Extended net operating loss (“NOL”) carryback period – The election to extend the standard two-year loss carryback period for an additional period of up to three years expired effective for NOLs arising in a tax year beginning after Dec. 31, 2009.
  11. Five-year carryback of NOLs attributable to pre-2010 federally declared disasters – The normal two-year carryback period applies to NOLs attributable to post-2010 federally declared disasters.
  12. Allowance of additional IRA contributions in certain bankruptcy cases – For tax years beginning after Dec. 31, 2009, the additional contribution provision doesn’t apply.
  13. Waiver of minimum required distribution rules for IRAs and defined contribution plans – The required minimum distribution rules are back in effect.
  14. Treatment of certain transfers in trust as taxable gifts under section 2503 – The rule treating any post-2009 transfer to a non-grantor trust as a gift was scheduled to expire on Dec. 31, 2010, but the 2010 Tax Relief Act retroactively repealed the rule.
  15. Use of single-employer defined benefit plan’s prior-year adjusted funding target attainment percentage to determine application of limitation on benefit accruals – The temporary relief rule expired December 31, 2009.

Expiring in 2010

  1. First-time homebuyer credit – Purchases after April 30, 2010, don’t qualify for the credit, but buyers who entered into written contracts by that date had until Sept. 30, 2010, to close on the purchase. In addition, extended deadlines apply to individuals serving on official extended duty outside the U.S.
  2. Sixty-five percent subsidy for payment of COBRA health care coverage continuation premiums – The COBRA premium reduction is not available for individuals who are involuntarily terminated after May 31, 2010. Individuals who qualified on or before May 31, 2010, may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.
  3. Alternative motor vehicle credit for qualified alternative fuel vehicles – The credit isn’t available for property purchased after Dec. 31, 2010.
  4. Making work pay credit – The credit, which was allowed for 2009 and 2010, isn’t available for tax years beginning after Dec. 31, 2010.
  5. Eligible small businesses allowed to offset AMT liability with general business credits – For tax years beginning after 2010, the provision allowing eligible small businesses to offset AMT liability with general business credits is not in effect.
  6. 5-year carryback of eligible small business credits – For tax years beginning after 2010, the carryback period reverts to one year (down from the 5-year carryback period allowed for eligible small business credits determined in tax years beginning in 2010).
  7. Work opportunity tax credit targeted group status for unemployed veterans and disconnected youth – Unemployed veterans and disconnected youth who begin work for the employer after 2010 are not treated as members of a targeted group.
  8. Modification of AMT limitations on tax-exempt bonds – Tax-exempt interest on private activity bonds issued after Dec. 31, 2010, is an item of tax preference for AMT purposes.
  9. Deferral and ratable inclusion of income from business debt discharged by reacquisition – The provision allowing debt discharge income from reacquisitions of business debt at a discount in 2009 and 2010 to be deferred for up to five years doesn’t apply to discharges after Dec. 31, 2010.
  10. Deduction of health insurance costs in computing self-employment tax – For tax years beginning after 2010, health insurance costs for self and family are not deductible in computing self-employment tax.
  11. Enhanced deduction limit and phaseout for startup costs – For tax years beginning after 2010, the maximum deduction for start-up expenditures is $5,000 (down from $10,000 in 2010), and the deduction phaseout threshold is $50,000 (down from $60,000 in 2010).
  12. Computer technology and equipment allowed as a qualified higher education expense for section 529 accounts – For expenses paid or incurred after 2010, computer technology and equipment is not allowed as a qualified higher education expense for section 529 accounts.
  13. Modified carryover basis rules for property acquired from a decedent who dies during 2010 – The modified carryover basis rules for property acquired from a decedent who dies in 2010 was repealed by the 2010 Tax Relief Act, but the executor can elect out of the estate tax and into the modified carryover basis rules for deaths in 2010.
  14. Temporary repeal of the estate and generation-skipping transfer taxes – The 2010 Tax Relief Act reinstated the estate and generation-skipping transfer taxes for decedents dying, and transfers made, after Dec. 31, 2009.
  15. Advance payment of the earned income tax credit (EITC) – For tax years beginning after 2010, advance payment of the EITC is eliminated.
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About Don James, CPA/PFS, CFP
Don is the Tax & Financial Planning partner with Kiplinger & Co., CPAs headquartered in sunny Cleveland, Ohio since 1982. He partners with business owners and families and specializes in goal achievement solutions, tax minimization strategies and serves in the role of gatekeeper of sound financial advice.

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