IT’S NOT ALL OR NOTHING AT ALL

Once again the idiots in Congress have put off dealing with the now infamous “tax extenders”.  And once again these idiots will probably extend the entire lot for at least one more year at year-end.

But should all of these tax benefits be extended, or, much “more better”, be made permanent?  I don’t think so.  Rather than automatically extending them all for a year, the idiots in Congress should review each one individually and determine its “appropriateness” – and make permanent those that they determine to be appropriate.  Of course because , being idiots, they wait until the very last minute each year they do not have the time to do anything but temporarily extend them all.

Here is a look at the more popular of the “tax extenders” that affect 1040 filers, with my “thumbs up” or “thumbs down” vote -

EDUCATOR EXPENSES - NO

This $38 - $70 gift from Uncle Sam is a nice nod to teachers, paying for a dinner out.  But why do teachers deserve this more than police officers or firefighters or nurses or other public service employees?  I see no real reason why this should be continually extended, or made permanent. 

DEDUCTION FOR TUITION AND FEES - YES

While the American Opportunity Credit generally provides the best tax benefit for college expenses, and is available to more taxpayers due to the higher income threshold, it is not available for graduate students.  This deduction is available to graduate students, and undergraduate students who have already claimed the AOC for the maximum 4 tax years  It is often “more better” than claiming the Lifetime Learning Credit, and is available to more taxpayers due to its higher income threshold.  For those reasons it deserves to be extended or made permanent.  However, that being said, I firmly believe the Tax Code should not be used for distributing government benefits.  All education tax benefits should be removed from the Tax Code.  These benefits should be delivered through the existing programs for student financial aid of the Department of Education.

OPTION TO DEDUCT STATE AND LOCAL SALES TAX - YES

This provides a tax deduction for residents of states that do not have a state income tax, and I have found that it often provides a better tax deduction for retired seniors.  It should be extended or made permanent.   

DEDUCTION FOR MORTGAGE INSURANCE PREMIUMS – DEFINITELY NO

I have absolutely no idea why this deduction was created – other than the aggressive lobbying of the mortgage insurance industry.  Mortgage insurance is life insurance, and life insurance premiums are not a deductible expense, other than as an employee benefit provided by employers.  I believe that potential homeowners should be encouraged to put more money down when purchasing a home – and avoid the need for mortgage insurance.  It certainly does not deserve to be extended or made permanent.

DIRECT TAX-FREE TRANSFER FROM AN IRA TO A CHARITY – DEFINITELY YES

This allows retired taxpayers over age 70½ who do not need to take all or any of the required minimum distribution (RMD) from their IRA for cash flow purposes, but are statutorily required to do so, to avoid increasing their Adjusted Gross Income by using the RMD to make a charitable contribution.  By reducing AGI this tax benefit could also reduce the amount of Social Security or Railroad Retirement benefits that are taxed.  This is the most “appropriate” tax benefit of the lot and truly deserves to be extended or made permanent. {NOTE- One of the very serious problems with the custom of waiting until the very last minute to extend the extenders is that by the time the law is enacted it is too late to take advantage of this tax benefit.}

What do you think?

TTFN