The IRS has announced that for the 2012 tax year, exemptions and deductions will rise and tax brackets will get larger because of inflation.
The amounts for many provisions that affect each taxpayer has to be amended every year in order to stay in line with inflation. Here are the new amounts that will affect 2012 taxes are:
-Personal and dependent exemptions will be $3,800.
-Standard deductions is $11,900 for joint returns, $5,950 for single and married, filing single and $8,700 for head of household. Most taxpayers take standard deductions rather than itemizing deductions.
-Tax brackets will get larger for every filing status.
Credits, deductions, and related phase outs.
-The earned income tax credit (EITC) for low and moderate income taxpayers will grow to $5,891. It is determined by family size and filing status. The maximum income limit to claim the EITC will now be $50,270.
-Foreign earned income deductions will rise to $95,100.
-Modified adjusted gross income (AGI) will be $104,00 for joint returns and $52,000 for single and head of household returns.
-Annual deductibles for Medical Savings Accounts (MSAs) will rise from last year.
The $2,500 deduction for student loan interest will phase out for joint returns with incomes of $125,000 and will totally phase out at incomes of $155,000, both of which are higher than last years amounts. Single filers will see no change for next year.
Estate and Gift
For estates of those who pass away in 2012, exclusions for estate tax will be $5,120,000 for 2011. For executors who use special valuation, the decrease in property value cannot be more than $1,040,000. The yearly gift exclusion will stay at $13,000.
Other Items
-Monthly limits on transportation benefit exclusions for employer provided parking will increase to $240. This is a temporary increase and limits the value of the transportation benefit exclusion in a commuter vehicle and transit passes that are employer provided. It will go back to $125 in 2012.
-Many other benefits won’t change for 2012. Standard deductions for the blind and seniors will stay at $1,150 for joint returns and $1,450 for single and head of household returns.
More detailed information on inflation adjustments, taxpayers can find Revenue Procedure 2011-52, which will be published in the Internal Revenue Bulletin 2011-45 on November 7th, 2011.
