Below is a summary of some important tax benefits available in 2012:
- Annual exclusion from gift taxes (the amount an individual may give to an unlimited number of donees each year) remains at $13,000; the annual exclusion for gifts to a non-citizen spouse increases from $136,000 to $139,000.
- Federal estate and gift tax exemption will increase to $5,120,000 per person (due to indexing for inflation), and the estate tax exemption remains portable at death. The federal estate and gift tax rate is still a flat 35%. These rules will expire at the end of 2012.
- Generation-skipping tax exemption increases to $5,120,000 in 2012.
- Massachusetts estate tax exemption (threshold) remains at $1,000,000 per person.
- Maximum 401 (k) and 403(b) contribution amounts increase to $17,000 per year, an increase of $500. Workers 50 years of age or older in 2012 can continue to contribute an additional $5,500 to their 401 (k) and 403(b) plans, bringing the total contribution amount to $22,500.
- Basic IRA contribution amount remains at $5,000, and individuals 50 years of age and older can continue to make an additional $1,000 "catch up" contribution.
- Single taxpayers with adjusted gross income of less than $110,000 (up to $125,000) and joint taxpayers with adjusted gross income of less than $173,000 (up to $183,000) can make nondeductible contributions to a Roth IRA. There is still no income limitation for rolling over a regular IRA to a Roth IRA; however, there is no longer the ability to defer the tax payment created by the rollover.
- The annual amount of earnings subject to social security taxes increases to $110,100. The social security tax rate for employees is scheduled to increase back to its usual rate of 6.2%, unless the 2011 "payroll tax holiday" that decreased the rate from 6.2% to 4.2% is extended by Congress. There is also a proposal to decrease the rate to 3.1 %.
- The kiddie tax threshold remains at $1,900, and applies to children under 19 years of age and to full time students under 24 years of age.