Thursday, December 29, 2011

Important tax changes for 2012

Yesterday, I gave you some last minute steps you can take to cut your 2011 taxes. So today, I’d like to tell you about a few changes that might help you in 2012.

The standard deduction, personal exemption and certain other figures the IRS adjusts for inflation will take their biggest jump in three years.

Your tax rate might drop, too ...

You won’t fall into the 35% bracket until you have a taxable income of $388,350 in 2012 on both single and joint returns, versus $379,150 this year.

And if your ordinary tax bracket is 15% or lower, you won’t have to worry about paying tax on qualified dividends and long-term capital gains. That means in 2012, you and your spouse can have a taxable income as high as $70,700, or if you’re single up to $35,350, before dividends and long-term gains are taxed. That’s not much different that 2011 when the limits were $69,000 and $34,500, respectively.

But it’s not all peaches and cream for 2012 ...

You’ll stand a greater chance of getting caught up in the dreaded alternative minimum tax. The exemption is scheduled to take a big drop next year when a provision of the 2010 Tax Relief Act expires.

You can see some of the changes in the chart below.

Standard deduction, single filer
Standard deduction, joint return
Personal exemption
ATM exemption

Single filer
Joint return
Long-term care insurance (max. deduction)

Age at end of tax year:

40 or under
Over 70
Roth IRA max. contribution

Single filer
Joint return
401(k) and 403(b) plans

Max. contribution
Catch-up contribution
Wages subject to Social Security tax

Best wishes,


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