Uncle Sam Announces Changes for 2012
The IRS and Social Security Administration have recently announced the cost of living inflation adjustments that will take effect for tax year 2012. The changes summarized below will allow taxpayers to defer more income into qualified retirement vehicles, increase deductions and exemptions, but some key tax benefits are expiring as well.
| 2011 | 2012 | |
| Exemptions, Deductions and Credits | ||
| Standard Deduction | ||
| Married Filing Jointly | $11,600 | $11,900 |
| Head of Household | $8,500 | $8,700 |
| Single and Married Filing Separate | $5,800 | $5,950 |
| Personal and Dependent Exemption | $3,700 | $3,800 |
| Estate and Gift Tax | ||
| Basic Estate Exclusion | $5,000,000 | $5,120,000 |
| Annual Gift Exclusion* | $13,000 | $13,000 |
| Retirement Plan Limitations | ||
| Total Defined Contribution Limit | $49,000 | $50,000 |
| Elective Deferral Limit - 401k, 403b, Roth 401k, SARSEP | $16,500 | $17,000 |
| Catch Up Contribution* | $5,500 | $5,500 |
| Traditional or Roth IRA Contribution* | $5,000 | $5,000 |
| Traditional or Roth IRA Catch Up Contribution* | $1,000 | $1,000 |
| Annual Defined Benefit Limit | $195,000 | $200,000 |
| SIMPLE Contributions* | $11,500 | $11,500 |
| Income Limit for Deductible IRA Contributions | ||
| Married Filed Jointly | $90,000 | $92,000 |
| Single* | $56,000 | $56,000 |
| Income Limit for Roth IRA Contribution | ||
| Married Filing Jointly | $169,000 | $173,000 |
| Single | $107,000 | $110,000 |
| Social Security | ||
| Social Security Taxable Wage Base | $106,800 | $110,100 |
| *No Adjustment for 2011 Base |
The following is a list of tax benefits set to expire or change on 12/31/11 barring any changes in legislation or extensions by congress:
- Higher alternative minimum tax exemptions revert back to non-indexed thresholds
- $250 school teacher expense deduction ends
- Mortgage insurance premium deduction expires
- State and local sales tax deductions expire
- Tuition and related fees deduction ends
- IRA to charity tax-free transfers stop
- 2% Social Security tax reduction ends
- The Section 179 deduction that allows small business owners to deduct 100% of the cost of qualifying equipment up to $500,000 will be reduced to a $139,000 limit.
On a positive note, the Social Security Administration has announced that it will apply a cost of living adjustment of 3.6% to benefits. The change, which will take effect beginning in January, is the first since 2009.
More information on the changes can be found in the following IRS releases:
http://www.irs.gov/newsroom/article/0,,id=248485,00.html
http://www.irs.gov/newsroom/article/0,,id=248482,00.html
If you have any questions or concerns about how any of the changes listed above may impact you, please contact us.