2012 Income Tax – Info

The following is a summary of topics for Tax Year 2012. This summary does not cover high income situations.

1. The individual income tax rates will be same as the 2010 rates.
2. The capital gains/dividends rates will be same as the 2010 rates. (15%)
3. The marriage penalty relief will remain (twice the singular rate)
4. The alternative minimum tax will remain the same as the 2009 rates.
5. The 2012 return has to be filed by midnight, April 15, 2013 (Monday).
6.  Education credit –American Opportunity Education Credit. The coverage is now for four years and up to 40% or $2000 credit. See Publication (Pub) 17, page 235 Form 8863.
7. Qualified child definition – See Pub 17, see Index or Form 1040 Instructions (Inst 1040) Earned income credit (EIC) – The change includes a third child in some cases. Details on maximum income levels, etc. See Pub 17, page 238 or Inst 1040.
8. Divorced or Separated Parents – new rules for claiming a non-custodial child. See Publication 17, see Index
9. Child invested income – Not subjected to parent’s tax rate with invested income under $1900.
10. Personal casualty or theft loss – limit is over $100. This is in addition to 10% of Adjusted Gross Income (AGI) limit that generally applies to the net loss.
11. First home or replacement homebuyer credit – if the house was purchased in 2008 see pub 17 page 257 for information.
12. Standard mileage rate for 2012 -– 55.5 cents per mile business miles, 23. for medical and 14 charitable organizations. For 2013, the standard mileage is 56.5 cents per mile
13. Electric vehicle credit – See Publication 17, page 184 for details.
14. Credit for energy conservation saving item – Stoves, refrigerator, windows, heaters, A/C, etc. You will receive a manufacturers’ certificate when the qualified item is purchased.  See Inst 1040. (Form 5695)
15. Roth IRA –No limit Also, half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010. See Publication 17, page 131 and Publication 590.
16. Retired savings contribution credit – The limit has been raised to $27,000 single ($41,625 MFJ) Personal/Dependency Exemption is $3,800 for each exemption,(Up $100.,(income limit is $166,800 in addition, reduction is in effect)
17. Standard Deduction    Single/MFS – $5,950 (UP $150) Married File Jointed – $11,900 (up $300)   Head of Household – $8,700  (up $200)  The additional standard deduction for the aged and blind will be $1,450 for singles and moves up to $1,150 for married taxpayers. No change. married
18. Standard Deduction  Married Filling Joint – $11,600 (up $200)   Head of Household – $8,500  (up $100)  Single/MFS – $5,800 (UP $100) The additional standard deduction for the aged and blind will be $1,450 for singles and moves up to $1,150 for married taxpayers.
19. Capital Gains and Losses.  Schedule D is no longer used as the input sheet, Form 8879 is the new revised sheet. The sheet totals are transferred to Schedule D. Form 8879 is use to comply with the requirement that a broker is to report cost for stocks bought in 2011 and later, mutual funds and reinvesting-dividend plans holdings in 2012. The form has columns for uncovered items, those bought before January 1, 2011, and a column for covered stocks, etc bought in 2011 and 2012, and a column for others. See Inst 1040, Section D for more details.
20. Maximum Social Security Tax for Self Employed – is $106,800 (6.2%). Medicare is taxed on all income (1.45%).
21. Estate of decedents -. Consult a CPA or tax attorney for the best option.
22. Earned Income Credit – See Form 1040 Instructions for qualifications and income limits.  Investment income must be $3,150 or less for the year.
23. Small Business – Schedule C - Required to file 1099 forms for a vendor proving $600 or more in service. Also must report credit card sales in 2012
24. Note: Form 1040 Instructions contain much of this same information.
    See Publication 17 for detail information on each type of income and deductions. It is free, very helpful, so use it. Pages cited are based on Pub 17, 2011 issue.
25. The printed 2012 edition of Pub 17 will be available after March 1, 2013.
26. IRS resources:
    1-800-829-1040 for information
    1-800-829-3676 to order forms and publications
    www.IRS.gov to obtain information and download forms and publications, etc. which are usually more current than commercial sources.
27. What’s New for 2013 Income Tax
28. EIC – income credit limits have been raised
29. Roth IRA income limits – raised to $120,000, single ($177,000 MFJ)
30. Medical-expense deduction (Schedule A) by most people that can be deducted must be greater than 10 of adjusted gross income, a change from 7.5%
31. Mileage is 56.5 cents per mile, medical is 24 cents per mile
32. Maximum employee contribution to 401(k) and 403(b) and is up by $500 to $17,000.
33. Cost reporting of mutual funds and reinvesting-dividend plans holdings.
34. Medical-device tax: A 2.3% tax on the sale of medical devices sold in retail stores. Glasses and contact lens are exempted.
35. People with high income with certain types of investment will have to pay an additional 3.8% assessment of the amount over the certain thresholds.

Expiring tax benefit: Medicare tax at 4.2%

Milton Gugenheim is a HAL-PC member and has been an AARP Tax Aide Instructor and Local Coordinator for over eighteen years. He may be contacted at guggy99@yahoo.com but no tax advice.

NOTICE: This information is our best efforts to provide you with current information. If you have a particular or unique personal question, consult a qualified tax accountant or lawyer. Even the IRS will not guarantee its own advice.