Tax Changes 2012
Standard deduction
The standard deduction for single taxpayers increases from $5,800 for tax years beginning in 2011 to $5,950 for tax years beginning in 2012. The standard deduction for married couples filing a joint return increases from $11,600 for 2011 to $11,900 for 2012. Heads of households will see a $200 increase in their standard deduction to $8,700 for 2012, up from $8,500 for 2011. The standard deduction for married couples filing separate returns rises to $5,950 for 2012, up from $5,800 for 2011.
Personal exemption
For tax years beginning in 2012, the personal exemption amount under Code Sec. 151(d) is $3,800, up from $3,700 for tax years beginning in 2011.
Kiddie tax
The amount used to reduce the net earned income reported on a child's return subject to the "kiddie tax" remains at its 2011 level of $950. The same $950 amount is used for purposes of Code Sec. 1(g)(7) to determine if a parent may elect to include a child's gross income in the parent's income and to calculate the kiddie tax.
Estate tax
For an estate of a decedent dying after December 31, 2011 and before January 1, 2013, the basic exclusion amount is $5,120,000 for determining the amount of the unified credit against estate tax.
Gift Tax
The gift tax annual exclusion remains at its 2011 level of $13,000 for 2012. The exclusion for gifts to a spouse who is not a citizen of the United States increases from $136,000 for 2011 to $139,000 for 2012.
Student loan interest deduction
For tax years beginning in 2012, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for single taxpayers with modified adjusted gross income (MAGI) in excess of $60,000 ($125,000 for married couples filing a joint return). The deduction is completely phased out for single taxpayers with MAGI of $75,000 or more ($155,000 for more for married couples filing a joint return)
Social Security Wage Base Increases for 2012
The maximum amount of earnings subject to Social Security will be $110,100 for 2012, up from $106,800 for 2011, the Social Security Administration (SSA) has announced. SSA also reported that the so-called "nanny tax" threshold will increase to $1,800 for 2012.
Wage base. Social Security limits the amount of earnings subject to taxation for a given year. This limit changes in connection with changes in the national average wage index. For earnings in 2012, the Social Security wage base is $110,100.
Credit Card Reporting
Businesses that accept credit and debit card payments will receive a Form 1099-K from their service provider in 2012 for transactions that occurred in 2011. Banks and other payment settlement entities are required to report credit and debit card and third-party network transaction to the IRS by February 28 for the preceding year. Some firms will receive multiple forms. The gross amount of reportable transaction will be listed by month, to assist those firms on a fiscal years basis.