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.
Tom Scanlon has over thirty years experience in public accounting with an extensive background in the areas of financial, tax, and estate planning. He prides himself on providing in-depth and customized solutions to privately held businesses and their owners. He is a Certified Public Accountant and Certified Financial Planner®. Tom is a frequent speaker for area organizations and has recently been quoted on CNBC, Fox 61 News and AARP's blog. Tom also has been a guest columnist for numerous publications including The Wall Street Journal, Barron's, Money Magazine, The Hartford Courant, The Hartford Business Journal, and The New Haven Register. He is a member of the American Institute of Certified Public Accountants, the Connecticut Society of Certified Public Accountants, and the Financial Planning Association. Active in the community, Tom supports a variety of not-for-profit organizations.
