Let’s face it: tax preparation can be confusing. There are exactly 73,608 pages in the 2012 tax code. Aside from those who wrote it and financial scholars not too many people have the time to read all 73,608 pages of the tax code. That can make tax preparation pretty intimidating. Too complicate matters even more, there are dozens of changes to the tax code every year. Here are a few for 2012:
• The 10%, 15%, 25%, 28%, 33% and 35% individual and trust tax rates will remain in effect until December 31, 2012.
• Standard deductions were increased to $11,900 for individuals that are married filing jointly, $8,700 for individuals filing as head of household, and $5,950 for individuals filing as single.
• The personal exemption amount has been raised to $3,800.
• The estate tax top rate is 35% with a gift tax exemption of $5 million.
• Section 179 deduction increased to $560,000 for capital assets acquired in 2012.
• 50% bonus depreciation is allowed for qualified assets placed in service in 2012.
• The tax on capital gains and qualified dividends is 0% for the 15% income tax bracket or below and 15% for the 25% income tax bracket or above.
• Required minimum distributions must begin in the year a participant turns 70 1/2.
• The IRA contribution limit remains at $5,000 or $6,000 if the participant is 50 or older.
• The social security taxable wage limit was increased to $110,100 this year from $106,800 for last year. Also changed, retirees under full retirement age now can earn up to $14,640 without losing benefits.
• The employee OASDI (Social Security) tax rate remains at 4.2% through February 29, 2012 (although this is likely to be extended through December 31, 2012.) Also, the OASDI tax rate under SECA (self-employment tax) remains at 10.4% (again through February 29, 2012, and subject to extension.)
• Mileage rates for business and medical were increased to $0.555 and $0.23 respectively. The mileage rate for charity remains the same at $0.14.
There are also plenty of things to be aware of if you hire professionals to prepare your tax returns for you. If you don’t want to spend five years in prison and pay quarter-million-dollar fines, there are things you should consider not doing. CLICK HERE to read this story and learn more about the ins and outs of the 2012 tax code.