I know most of us are focusing on the preparation of our 2011 taxes, but I thought this would be a good time to provide you with a brief overview of some of the major tax law changes that are in effect for 2012.
- PAYROLL TAX CUT for employees extended through February 29, 2012. (Social security tax rate on wages up to $110,100 will be 4.2% rather than 6.2%.)
- ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.
- SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.
- STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
- ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000.
- ANNUAL GIFT TAX EXCLUSION remains at $13,000.
- 401(k) maximum salary deferral increases to $17,000($22,500 for 50 and older).
- SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
- IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
- KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
- NANNY TAX threshold increases to $1,800.
- TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
- SOCIAL SECURITY taxable wage limit increases to $110,100.
- Retirees under full retirement age can earn up to $14,640 without losing benefits.
- HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
We will keep you up-to-date on additional changes to the 2012 tax law as the year progresses. If you have any questions regarding the impact of these law changes, please do not hesitate to contact us.