This article by Gina Noy, was originally posted at noytaxassociates.com. Gina will be teaching Tax Freedom through Planning, a class + lab on tax planning for independents at NWCU.

With 2011 coming to an end many popular deductions will be ending as well. This is the last year to take advantage of the favorable tax benefits.

1. Social Security Taxes.

For 2011 only, Social Security tax was reduced to 4.2% for employees and to 10.4% for self-employed (SE) person. In 2012, the Social Security tax will revert to its regular rate of 12.4%, with half (6.2%) paid by employers and the other (6.2%) paid by employees. SE person will pay the full 12.4% rate as part of SE tax.

2. Tuition and Fees Deduction

The above the line deduction for college tuition expires at the end of 2011. Lifetime Learning Credit and American Opportunity credit will be available for college students in 2012.

3. Alternative Minimum Tax

First, 2011 will be the last year when personal tax credits will be allowed to offset both the regular tax and the AMT. Starting in 2012 and forward, tax credits will offset the regular income tax, but not AMT. Second, temporarily patched exemptions for AMT will end in 2011. For 2012 and future years, the AMT exemption amounts will revert to a lower stator amounts ranging from $22,500 to $45,000. This will result in more taxpayers being subject to the AMT, and will increase the adjustments for taxpayers already subject to this tax.

4. Mass Transit Benefit

Mass Transit tax-free exclusion, for 2011 is $230 a month. The amount for 2012 for mass transit benefit eligible for tax-free treatment is $125 a month and parking benefit is set at $240 per month.

5. Mortgage Insurance Premiums

Deduction for mortgage insurance premiums expires at the end of 2011.

6. Bonus Depreciation

Special 100% bonus depreciation is allowed for the purchase of new equipment placed in service for 2011. In 2012, bonus depreciation goes to 50% of the purchase price of newly acquired equipment. After 2012 the deductions is eliminated.

7. Section 179 Deduction

Section 179 allows up to $500,000 in current deduction to be taken on purchased equipment. For 2012, the deduction is only $125,000 and for 2013 and later the limit will be $25,000. For 2010 and 2011 you can deduct up to $250,000 of qualified improvement costs for certain kinds of real property; interiors of leased non-residential buildings, restaurant buildings, and interiors of retail buildings. Improvements, if needed, should be done in 2011 because the tax break won’t be available after 2011 unless Congress extends them.

8. Leased Car for Business Use

In 2011, some leased cars are allowed 1st year depreciation deduction of 100% for business property, if it is acquired after September 8, 2010 and before January 1, 2012 and put into use by January 1, 2012. The FMV of the leased car must bye $18,500 or more.

9. Business Startup Costs

Startup Costs are “amount paid or incurred for creating an active trade or business, or investigating the creation or acquisition of an active trade or business”. Starting in 2010, business can deduct up to $10,000 for start-up costs, there is a dollar-for-dollar reduction of the $10,000 deduction if start-up costs exceed $60,000.

10. Home Office Expenses

If you are working from home make sure that you are using the office regularly and exclusively for business purposes, make a floor plan showing the area you use for your business and the percentage of the square feet of the home. Also take photo of your home office so it is on file if there any questions later and please keep detailed records of expenses to substantiate your deductions.

Disclaimer: If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.