Simplifying the Protecting Americans from the Tax Hikes Act into Layman’s Terms

New tax laws are added every year. These things don’t always make the nightly news. Here are a few pieces of information which will help you understand the newly signed Protecting Americans from the Tax Hikes Act.

Tax Credits Extended

Under this new act, tax credits that were scheduled to expire have been extended. Some of these include the deduction school teachers receive for supplies they purchase during the school year. The American Opportunity Tax Credit was extended. The Enhanced Earned Income Credit was also an extended under this act.

Taxpayers can make tax free distributions from their IRA accounts. This applies after the taxpayer has reached the age of 70 ½. Taxpayers can contribute up to $100,000 a year.

Healthcare Provisions Paused

A moratorium was placed on certain parts of the healthcare act. The moratorium was placed on the excise tax associated with certain medical devices and the excise tax associated with certain high cost healthcare plans.

Changes to Individual Taxpayer Identification Numbers

Individual Taxpayer Identification Numbers (ITINS) are issued to people that need to file a tax return but do not qualify for a social security number. Under the old rule, ITINs would expire after they hadn’t been used for five years. What has changed is that if the taxpayer’s number was issued prior to January 1, 2013, the number will expire on a staggered schedule. If the taxpayer’s number was issued after December 31, 2012, the number will expire if it is not used on a return in three years.

Changes in tax laws can be beneficial. Some of these changes will help you get more money when tax time comes. Check with your tax professional or accountant to see how these new rules will affect you during the next tax season.

Image credit: Alan Cleaver