The $1.1 trillion spending bill that the Senate passed late Saturday will keep the government open until next September, funding a host of government agencies. By Wednesday, Congress also needs to extend dozens of tax breaks affecting a broad swath of the economy. Most of those tax breaks affect corporations, but eight are especially valuable for individuals. These are nowhere near as significant as previous battles over income tax rates, but for specific groups of people -- teachers, residents of certain states, people underwater on their mortgage, parents with kids in college -- they can be especially meaningful.
The following eight tax breaks would expire if Congress doesn't pass a law extending them.
1. Deduct state and local sales tax. Good news for everyone who lives in Texas, Florida, Nevada, Washington, Wyoming, Alaska and South Dakota: not only do you pay nothing in state income taxes, but you can also keep deducting your state and local sales taxes instead. For everyone else, though, nothing changes.
2. Mortgage writedowns won't be taxed. If you're underwater on your mortgage, getting your bank to write it down sounds like it would be unambiguously good. But it wouldn't be when the IRS comes around and demands that you pay taxes on all your discharged debt, which technically counts as "income." Except that, in a rare case of Washington actually working, Congress changed this rule in 2007 so homeowners wouldn't have to pay taxes on any mortgage writedowns. Now that's been renewed for another year.
3. Fill up your transit card with pre-tax dollars. Once again, you'll be able to set aside as much as $245-a-month to pay for public transit without being taxed on it.
4. Deduct tuition and fees. You can keep deducting up to $4,000 on any college tuition or educated-related expenses you have for yourself, your spouse, or your child.
5. Teachers can write-off up to $250 that they spend on classroom supplies. Because if we're not going to adequately supply our schools, the least we can do is give teachers a small tax break when they spend their own money on it.
6. Mortgage insurance premiums can count for the mortgage interest deduction. If there's one thing Congress loves doing, it's subsidizing the housing market through the tax code.
7. Contribute to charity from your IRA without any tax penalties if you're over 70. In theory, the charitable deduction should offset any taxes you owe if you donate money from your IRA. But in practice, that's not always true, so this lets retirees do so without having to worry about the taxman.
8. Deduct any capital gain property you donate to conservation groups. Landowners who give the development rights to their land to protect natural resources can continue deducting a higher percentage of their income over a longer period of time than the normal limits on deduction would allow for the non-wealthy. The idea, of course, is to make more economical for environmentally-minded landowners of more modest means to donate their property.
**Correction: This post has been corrected as the bill passed by the Senate Saturday night did not address these tax provisions, but they are expected to be included in legislation to be passed by Wednesday.