On January 1 of each year, the Internal Revenue Service (IRS) makes various changes to the Internal Revenue Code and therefore to the laws governing how we calculate federal income tax returns. This means that you as the taxpayer must be familiar with these changes if you are preparing your tax return yourself, or if you are using a trained tax professional to complete and file your tax return, being sure he tax professional is familiar with the changes to the tax laws. The primary reason the IRS is making the changes in the tax laws for 2012 is to adjust for inflation. Therefore, in general, if you earn the same amount of money in 2012 as you earned in 2011, you will pay slightly less tax in 2012 as compared to 2011.
Keep in mind that while these changes go into effect as of January 1, 2012, they will not impact your federal income tax return until the return you need to file by April 15, 2013. The federal income tax return you need to file by April 15, 2012 is based on the tax laws that were in effect during the 2011 calendar year.
Without further delay, here are the most important changes for the 2012 tax year.
Increase in personal exemptions. The personal exemption amount has been increased $100 to $3,800.
Increase in standard deductions. The standard deduction has increased different amounts depending on the filing status used by the taxpayer, with the increases as follows:
- For married filing jointly, up $300 to $11,900
- For singles/married filing separately, up $150 to $5,950
- For head of household, up $200 to $8,700
Increase in tax bracket thresholds. The amount of money separating each tax bracket has increased, so you must earn more money before you move into a higher tax bracket as compared to 2011.
Increase in medical savings deductible. The annual deductible amount for Medical Spending Accounts (MSAs) has increased by various amounts depending on if you are an individual or a family. The MSA is money that can be set aside pre-tax to spend on medical expenses.
Increase in student loan deduction phase out level. Up to $2,500 in interest paid on student loans may still be deducted, but the income level when this deduction is phased out has increased by $5,000. The phase out not begins at $125,000 and phases out completely at $155,000.
Increase in estate tax exclusion. The amount left behind upon someone’s death, known as their estate, is not taxed unless it exceeds $5,120,000, which is up $120,000 from the 2011 amount.
How can I get help from a tax attorney in calculating my income tax?
If you need help from an attorney, please complete the short form below and a tax attorney can contact you to discuss your situation. A tax attorney can start discussing your situation at any point during the year, but the earlier in the year you involve a tax attorney, the sooner you can take steps to keep documentation that will help to better file your tax return.
Keep in mind that the initial consultation with a tax attorney is free of charge, completely confidential, and does not obligate you to anything further. Therefore, please take this opportunity to start getting help in completing your tax return correctly based on the updated tax laws.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.