IRS issues cost-of-living adjustments for 2012 tax year
Although most Americans will not have to worry about 2012 taxes until early 2013 when 2012 tax returns are due, self-employed individuals or anyone who must pay quarterly tax payments will want to plan ahead.
And there's good news for those that do. The IRS recently announced cost-of-living adjustments for the 2012 tax year that bump up brackets, deductions, and other thresholds for inflation.
The following is a summary of the key changes for 2012.
- Exemptions are up: The personal and dependent exemption increases to $3,800, up $100 from 2011.
- Standard deductions have increased: The 2012 standard deduction increases to $11,900 for married couples filing a joint return, $5,950 for singles and married individuals filing separately, and $8,700 for heads of household.
- Tax-bracket adjustments: Tax-bracket thresholds have increased for each filing status (see table below).
- Estate tax exclusion has increased: The estate tax exclusion increases to $5,120,000, up from $5,000,000 for 2011. The annual exclusion for gifts will remain at $13,000.
- Earned income credits rise: The maximum earned income tax credit (EITC) rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC increases to $50,270, up from $49,078 in 2011.
- Transportation benefits adjusted: The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains at $1,150. The deduction for married individuals, as well as the $1,450 deduction for singles and heads of household also remains the same.
Details on these and other inflation adjustments can be found in Revenue Procedure 2011-52.
2012 Tax Brackets
This article is provided by Yeo & Yeo, CPAs & Business Consultants. For more information, contact Alan R. Rohde, CPA, PFS, at Yeo & Yeo’s Flint office, (810) 732-3000. Yeo & Yeo is a local member in good standing with the Financial Planning Association, producers of the article.