Or if you’re kind of a tax nerd like me, you might take some pleasure in breaking down the tables and watching the software do it’s thing.
Either way, here are the tax law changes that apply to the 2012 tax year.
2012 Tax Law Changes
Lets start with some of the basic inflationary changes and what stayed the same:
The friendly old Bush-era tax cuts were once again extended, which left many things unchanged from 2011 to 2012. The U.S. federal income tax brackets remained the same but the income limits did go up slightly for inflation.
- The standard deduction went up a bit (see below).
- The child tax credit remains unchanged at $1,000 per child.
- The personal and dependent exemption was bumped up $100 to $3,800.
- The earned income tax credit rose to $5,891, and the maximum income limit for the credit rose to $50,270.
- The foreign earned income exclusion got bumped quite a bit to $95,100.
- 55.5 cents per mile is the standard mileage rate you can expense if you use your car for business.
More Details About 2012 Tax Law Changes
Payroll Tax Break is Still Around – Even though this is going away for 2013, the payroll tax break was still available for all of 2012.
The way this works is that one half (the employee half) of the Social Security portion of the payroll tax has been reduced to 4.2%. That’s down 2% from the normal 6.2%. This change should have been automatically reflected in your paycheck for 2012. Goodbye payroll tax break. Sniff, sniff. We enjoyed you while it lasted.
The Saver’s Credit AGI Was Increased Again – They keep making this saver’s credit easier and easier to get into. The adjusted gross income (AGI) limits are now:
- Married filing jointly is $57,500
- Head of household is $43,125
- Single filers is $28,750
Nice that they keep making it easier for folks to save through this credit. I’d love to see stats on the number of people using this credit.
Roth IRA Conversion 50% to Report – Did you do a conversion into a Roth IRA in 2010? You are a wise one. You are!
Here’s the thing though, if you elected to spread the effects of the conversion 50/50 over two years then this is year number two. You’ll need to report 50% of the conversion as ordinary income on Form 1040 under Line 15a on your 2012 return.
Increased Standard Deduction – If you are one of the lucky few for which life is so simple that the standard deduction does the trick, you are in luck. For the tax year 2012, the standard deductions for all peeps have been upped to keep up with inflation:
- Married filing jointly is $11,900
- Single is $5,950
- Head of household is $8,700
Hey kids, this year the absolute last day to file taxes (that is, your federal personal income taxes) is April 15th, 2013. Don’t delay!
There are probably more changes to consider when you sit down to file your 2012 tax return. If you are aware of big changes please share them in the comments below.
Previous year changes are on the next page.