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Tax Provisions in Effect Through 2012:
The annual gift tax exclusion is $13,000.
The maximum IRA contribution is $5,000. Individuals over age 50 may contribute an additional $1,000.
The limit for SIMPLE IRA contributions remains $11,500 in 2012. Those over age 50 may contribute an additional $2,500.
Taxpayers who participate in a 401(k) retirement plan, may defer wages up to $17,000 in 2012. Those over 50 may contribute an additional $5,500. (The 2011 limit was $16,500 and $5,500.) Total contributions, including employer matching are limited to $50,000 in 2012, up from $49,000 in 2011.
Income tax rates remain at their current levels of 10%, 15%, 25%, 28%, 33% and 35% based on income levels. The maximum tax rate for qualifying dividends and long-term capital gains remains at 15% (0% for those in the lowest tax bracket.)
The American Opportunity Tax Credit provides for college students, a maximum credit of $2,500 a year. This credit may be claimed for each eligible student attending his or her first four years of college. You need to pay tuition and fees of $4,000 or more to get the maximum credit for your dependent student.
The 2010 Tax Relief Act extended the $1,000 per child tax credit through December 31, 2012.
More taxpayers will continue to benefit from the student loan interest deduction due to lower restrictions on the deduction.
The Following Tax Provisions Expired on December 31, 2011:
The deduction for state and local sales taxes in lieu of the state and local income tax deduction expired. This filing season is the last for this option.
The $250 Educator Expense Deduction. Congress may choose to renew it; however, it is not available in 2012.
This filing season, is the last year for the tuition deduction, however credits for tuition expenses are still available in 2012.
The provision to make tax-free distributions from individual retirement plans for charitable purposes has expired.
The AMT (alternate minimum tax) was adjusted for 2011 to minimize its impact on middle class families. Congress increased the exemption amounts for 2011 to $48,450 for single individuals, $74,450 for married couples and surviving spouses, and $37,225 for married individuals filing separate. We will have to wait and see what they do for 2012.
Click on the News link below and read the Tax Alerts, Tax Briefing, and 2011 Year in Review available on our website.
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