2012 is just around the corner and there is good news coming from the IRS and Social Security Administration. They both have annouced increases in benefits for the next year.
Read further for an update of some of the changes.
Personal and Dependent Exemption – The personal and dependent exemption for most taxpayers is $3,800, up $100 from 2011.
Standard Deduction – The new standard deduction is $11,900 for married couples with a joint return. This figure is up by $300 from the prior tax year. For singles and married people filing separately, the new figure is $5,950, representing a $150 increase from 2011. Heads of households have a standard deduction of $8,700, up from $200 in the prior tax year.
Tax-Bracket Thresholds – The IRS is increasing the tax-bracket thresholds for each filing status. For example, married couples filing a joint return will have a new taxable-income threshold marking the 15-percent bracket from the 25-percent bracket, now set at $70,700 in 2012. It was $69,000 in 2011.
Qualified Transportation Fringe Benefit - The fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass goes down to $125 for 2012 unless Congress takes action to increase it. (For 2011, it was temporarily increased to $230) The amount for qualified parking is $240 monthly for 2012, up $10 from 2011.
Contributions to 401(k) and 403(b) Plans - Taxpayers can contribute up to $17,000 for 2012, up $500 from 2011. The catch-up contribution amount for those age 50 and older remains $5,500.
Foreign Earned Income Deduction – The foreign earned income deduction will be $95,100 in 2012, representing an increase of $2,200 from the maximum deduction for tax year 2011.
Kiddie Tax - The amount used to reduce the net unearned income reported on a child’s return that is subject to the “kiddie tax” is $950.
Student Loan Interest – The $2,500 maximum deduction for interest paid on student loans begins to phase out for married taxpayers filing joint returns at $125,000. It phases out completely at $155,000. This is an increase of $5,000 from the phase out limits for tax year 2011. The phase out ranges for single taxpayers is the same as the prior tax year.
Estate and Gift Taxes – For an individual dying in 2012, the basic exclusion from federal estate tax will be $5.12 million, representing an increase from the $5 million amount for calendar year 2011. Also, if the executor opts to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1.04 million. This figure is up from $1.02 million for 2011.
The exclusion for gifts remains the same, set at $13,000 per individual for the year.
Earned Income Tax Credit – For tax year 2012, the maximum earned income tax credit for low- and moderate- income workers and working families increases to $5,891 vs. $5,751 in 2011. The maximum income limit for the earned income tax credit increases to $50,270, up from $49,078 in 2011. (The credit can change depending on the family size, filing status and other conditions.)
If you have questions about these or other tax issues, contact us!
