Although we are looking to start filing season for 2011 tax returns, it is also important to consider changes in effect for 2012. Some important tax changes for 2012 are:
• Each personal and dependent exemption is $3,800 - an increase of $100 over 2011.
• The 2012 standard deduction rose slightly. A taxpayer filing as single (or married filing separately), saw a $150 increase to the basic deduction as it rose to $5,950. Married couples filing a joint return gained a $300 deduction to $11,900. Those filing as Head of Household have an additional $200 deduction as the amount increased to $8,700.
• The maximum earned income tax credit for low and moderate income workers rose to $5,891 for 2012, a $140 increase from 2011.
• Standard mileage rates regarding medical miles driven remained unchanged at 14 cents per mile. The deduction for charitable mileage increased by 4 cents, however, as it rose to 23 cents per mile. Business miles driven increased to 55.5 cents per mile for most vehicles earlier in 2011 and that amount remains unchanged going into 2012.
• Though the credit amounts don't change for 2012, the modified adjusted gross income threshold at which the lifetime learning education credit begins to phase out is $104,000 for joint filers and $52,000 for single filers. This is up from $102,000 and $51,000, respectively.
• Perhaps the item with the potential for greatest impact is the decreased Alternative Minimum Tax (AMT) exemption from $74,500 to $45,000 for a married couple. Single taxpayers and those filing Head of Household experience an exemption decrease from $48,450 to $33,750. If you are unsure about this change and it's impact please discuss with the office.
• Lastly, the FICA ceiling rose to $110,100 from $106,800. The good news is that the employee rate remains at 4.2% at least through February 29, 2012. Currently, that rate is slated to increase to the historic rate of 6.2% after that date, but many believe the lower rate will be extended for the entire year.
These are some of the changes that have already occurred and I expect additional changes to occur as this is an election year and most politicians will be looking to keep things to the advantage of the American public to stay in their good graces.