2012 Tax Law Changes You Need to Know

I wanted to take a quick moment to review some of the basic tax law changes that will be relevant for those filing a 2011 return.

In the coming weeks, I might be presenting posts that break some of these important changes down even further.

But for now, I’ll just give the highlights of each change affecting the 2011 tax filing season.

The Bush tax cuts were essentially extended, leaving many things unchanged from last year to this year. Federal income tax brackets will remain unchanged, but the standard deduction will go up, while the child tax credit also remains unchanged.

This year’s biggest change came in the form of the payroll tax break to your withholding, essentially continuing the “making work pay” credit.

2011 Tax Law Changes

Here are some of the tax law changes we saw which will affect the 2011 filing year.

Payroll Tax Break – For 2011 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%. Don’t ask me how they are making up the difference. Anyway, you should have seen this change reflected in your paycheck all throughout 2011.

Of course, for any self-employed folks out there, you get the 2% break only on the employee half of your payroll tax. Accordingly, if you normally take the deduction for 50% of the self-employment tax on your 1040, then you will need to reconfigure based on the new percentages.

AGI for Saver’s Credit Increased – If you’ve previously been unable to participate in the Saver’s Credit, look again. The adjusted gross income (AGI) limits are now $56,500 (married filing jointly), $42,375 (head of households), and $28,250 (single).

Report 50% of Roth IRA Conversion – If you did a Roth IRA conversion in 2010 you had the option to report the conversion and pay the appropriate taxes in 2009, or spread your reporting out 50/50 over the 2011 and 2012 tax years. Now that returns for 2011 are due, you need to report 50% of the conversion as ordinary income on Form 1040 under Line 15a.

Standard Deduction Increased – For 2011, the standard deduction for married people filing jointly is $11,600, $5,800 for single, and $8,500 for head of household. Tax rates did not change as the government extended the Bush tax cuts.

Note that the last day to file 2011 taxes (federal personal income taxes) is April 17th, 2012.

I know there are other changes to consider when filing your 2011 tax return. If you know of any, please leave them in the comments below.

Previous year changes are on the next page.

Last Edited: January 19, 2013 @ 3:00 am The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.
About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.


  1. Bummer! Are there any new and exciting tax credits for 2011?

  2. Unfortunately, no. Nothing really new on the credit side of things. Several credit reductions. :(