The Internal Revenue Service announced today the tax benefits that will be adjusted for inflation in 2012. Details on these inflation adjustments are in Revenue Procedure 2011-52 which will be published in Internal Revenue Bulletin 2011-45 on November 7, 2011. The Service announced these adjustments in IR-2011-104 which I have summarized below:
Exemptions, Deductions, and Individual Tax Brackets
The value of each personal and dependent exemption, available to most taxpayers, will be $3,800, up $100 from 2011.
The new standard deduction will be $11,900 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. The Service said that nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket will be $70,700, up from $69,000 in 2011.
For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.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.
The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out will be $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts. See the table below:
|
Medical Savings Accounts (MSAs) |
Self-only coverage |
Family coverage |
|
Minimum annual deductible |
$2,100 |
$4,200 |
|
Maximum annual deductible |
$3,150 |
$6,300 |
|
Maximum annual out-of-pocket expenses |
$4,200 |
$7,650 |
The $2,500 maximum deduction for interest paid on student loans will begin to phase out for a married taxpayers filing a joint returns at $125,000 and will phase out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges will remain at the 2011 levels
Estate and Gift Exclusions
For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount will be $5,120,000, up from $5,000,000 for calendar year 2011. If the executor chooses to use the special use valuation method for qualified real property for a 2012 estate, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.
The annual exclusion for gifts will remain at $13,000.
After I have reviewed the complete Revenue Procedure, I may post additional items that will be adjusted. In these taxing times, we’ll take all of the benefits we can get!
Ronnie
Copyright 2011, Ronnie C. McClure, PhD, CPA
