We're in the thick of tax season and the Monday, April 15 deadline is fast approaching! What changed from last year? Let's keep these updates in mind as you file your 2012 taxes. IRS.gov is an informative website and a helpful resource. I'll summarize some of the primary changes to tax code found in this IRS article.
1. Tax Brackets rose due to inflation and range from 10 percent to 35 percent depending on income and filing status. The IRS gives this example, "For a married couple filing a joint return, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011." A comprehensive 2012 tax table can be found here.
2. Standard Deductions also rose due to inflation. If you're not sure whether or not to take the standard deduction (or itemize), our recent post, "Standard vs. Itemized: Which Tax Deduction Do I Take?" will point you in the right direction. According to the IRS: "The new standard deduction is $11,900 (2012) for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200."
3. Earned Income Tax Credit is $5,891 in 2012. That has risen a bit from $5,751 in 2011. This credit is meant to benefit low and moderate income workers and their families. It's important to note that, "The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children."
4. Lifetime Learning Credit allows you to claim up to $2,000 for qualified educational expenses assuming you are eligible. The phase out in 2012 begins at, "$104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000."
5. Estate Tax, also known as a "death tax", has remained fairly steady. If a taxpayer passed away in 2012, the exclusion for their estate is $5,120,000. If the estate is above this amount it will be taxed. This is up from $5,000,000 in 2011; however, due to proposed legislative changes it's been difficult to know if there will be consistency in this figure from one year to the next.
One notable deduction that did not change is the additional standard deduction for blind people and senior citizens. It remains $1,150 for married individuals and $1,450 for singles and heads of household.
Be sure to check your state's laws to see how your taxes are affected. Above and beyond legislative tax changes, your personal income, expenses, etc. have the potential to have the most impact on your 2012 tax filing. Please remember that everyone's situation is a little different. If you think some of these tax changes apply to you, be sure to reach out to a qualified tax professional so you can maximize your tax savings.
This post was written by SaveUp's personal finance contributing writer, Catherine Hawley, CFP®.