Getting Ready for Tax Season: Changes for 2012

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 for married individuals and $1,450 for singles and heads of household.

Details on these and other inflation adjustments can be found in Revenue Procedure 2011-52.

2012 Tax Brackets

Single

Joint Filers

Married Filing Separately

10%

$0 - $8,700

$0 - $17,400

$0 - $8,700

15%

$8,700 - $35,350

$17,400 - $70,700

$8,700 - $35,350

25%

$35,350 - $85,650

$70,700 - $142,700

$35,350 - $71,350

28%

$85,650 - $178,650

$142,700 - $217,450

$71,350 - $108,725

33%

$178,650 - $388,350

$217,450 - $388,350

$108,725 - $194,175

35%

Over $388,350

Over $388,350

Over $194,175

Tracking #1-029020 

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