2012 Tax Benefits Increase Due to Inflation Adjustments

Every year the IRS must adjust the dollar amounts of a variety of provisions which affect every taxpayer, to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013 include the following:

  • The amount of the personal and dependent exemption will be $3,800, up $100 from 2011.
  • The new standard deduction is $11,900 for married couples filing a joint return, up $300; $5,950 for singles and married individuals filing separately, up $150; and $8,700 for heads of household, up $200. Many people take the standard deduction, rather than itemizing deductions, which include mortgage interest, state and local taxes and charitable contributions.
  • Tax–bracket thresholds have increased for each filing status. For married couples filing jointly, the income threshold separating the 15% bracket from the 25% bracket is $70,700 up $1,700.
  • The elective deferral (contribution) limit for employees who participate in section 401(k), 403(b) or 457(b) plans and the federal government’s Thrift Savings Plan increases from $16,500 to $17,000. The catch-up contribution limit under those plans for those age 50 and over is unchanged at $5,500.
  • The $13,000 annual gift exclusion is unchanged, although the estate and gift lifetime exclusion for decedents dying during 2012 goes up from $5 million to $5.12 million.
  • The revenue procedure also gives new figures for the child tax credit; American opportunity and lifetime learning credits; and the earned income credit—40 items in all.
  • The Social Security Administration also announced that the Social Security wage base for 2012 will be $110,100 (up from $106,800 in 2011).

ACTION ITEM: Meet with your CPA to review coming tax law changes that may impact you.

About the author:

Tom Scanlon, CPA, CFP®

Tom Scanlon has over twenty-five years experience in public accounting with an extensive background in the areas of financial, tax and estate planning.
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