TOOLS AND TECHNIQUES OF INCOME TAX PLANNING 3 RD EDITION 2012 Supplement Chapter 2 p. 11 In 2012 the income threshold for married person filing jointly is $19,500 (if one spouse is blind or elderly 20,650; if both spouses are blind or elderly 21,800; if both spouses are blind and elderly 24,100). A married taxpayer with gross income of $3,800 or more in 2012 must file a return if he and his spouse are living in different households at the end of the taxable year. The income threshold for a surviving spouse is $15,700 (if elderly or blind $16,850; if elderly and blind - $18,000). The income threshold for head-of-household is $12,500 (if elderly or blind - $13,950; if elderly and blind - $15,400). The income threshold for a single person is $9,750 (if elderly or blind - $11,200; if elderly and blind - $12,650). The income threshold for a married individual filing separately who does not itemize is $9,750 (if elderly or blind - $10,900; if elderly and blind ($12,050). If either spouse itemizes - $3,800. An individual who may be claimed as a dependent of another must file a return if he has unearned income in excess of $950 (plus any additional standard deduction if the individual is elderly or blind or gross income exceeds the sum of any additional standard deduction if the individual is elderly or blind plus the greater of (a) $950 or (b) the lesser of (i) $300 plus earned income or (ii) $5,950. Non-resident aliens or those filing a short year return because of a change in accounting period - $3,800. p. 12 In 2012 the threshold for the Kiddie tax remains at $1,900. Chapter 3 p. 19 The exclusion of $2,400 of unemployment compensation was applicable only for 2009. Chapter 4 pp. 30-31 In 2012 the Traditional and Roth IRA contribution limits remain at $5,000. In 2012 the IRA Active Participant AGI phase-out ranges are as follows: Single Married Filing Jointly Married Filing Separately 58,000-68,000 92,000-112,000 0-10,000
A non-active participant spouse may receive a full IRA deduction if joint income is less than $173,000. The non-active spouse may receive a partial deduction if joint income is between $173,000 and $183,000. In 2012 the student loan deduction phase-out remains at $60,000-$75,000 MAGI for single taxpayers and rises to $125,000-$155,000 for joint returns. In 2012 the Tuition and fees deduction is still available. p. 32 The phase-out of itemized deductions remains repealed in 2012. p. 34 In 2012 the standard deduction is $11,900 for a married couple filing jointly, $8,700 for heads of households, $5,950 for other unmarried individuals, and $5,950 for married taxpayers filing separately. The additional standard deduction for the aged and blind is $1,150, which increases to $1,450 for unmarried individuals who are not surviving spouses. The standard deduction for a dependent remains the greater of (1) $950, or (2) the sum of $300 and the individual s earned income. In 2012 the personal exemption is $3,800. p. 35 In 2012 the limitation on premiums paid for a long-term care policy are the following Attained Age Limit on Premium 40 or less $350 41 through 50 $660 51 through 60 $1,310 61 through 70 $3,500 Over 70 $4,370 p. 36 The phase out of exemptions remains repealed in 2012. Chapter 5 p. 39 Nonrefundable personal credits may be used to offset the regular income tax and alternative minimum tax through 2011. Congress may act later in 2012 to extend this to 2012. The child tax credit remains at $1,000 through 2012. p. 40 In 2012 the earned income amount for determining whether the child tax credit is refundable remains at $3,000. p. 42 In 2012 the Hope and Lifetime Learning Credit amounts remain the same as 2010. In 2012 the maximum adoption credit is $12,650. The credit begins to phase-out at a MAGI of $189,710 and is completely phased-out at $229,710. Copyright 2012 The National Underwriter Company 2
p. 43 In 2011 and 2012 the Making Work Pay credit was replaced by a 2% Social Security tax reduction. The First-time Homebuyer Credit was extended to purchases that were closed before October 1, 2010. Chapter 6 p. 45 Educator expense deduction were extended through 2011; tuition and fees deductions were extended through 2012. p. 47 In 2012 the OASDI tax is imposed on up to $110,100. Due to the payroll tax holiday, the maximum OASDI self-employment tax is $11,450.40. Chapter 9 p. 61 In 2012 the tax bracket for trusts and estates is as follows: ESTATES AND TRUSTS Tax Years Beginning in 2012 Tax on Lower on Excess $ -0- to $2,400 $ -0-15% 2,400 to 5,600 360 25% 5,600 to 8,500 1,160 28% 8,500 to 11,650 1,972 33% 11,650 to 3,011.50 35% Chapter 11 p. 72 In 2012 the OASDI tax is imposed on up to $110,100. Due to the payroll tax holiday, the maximum OASDI self-employment tax is $11,450.40. Chapter 16 p. 101 In 2012 the aggregate cost that may be expensed under IRC section 179 is $139,000. The $139,000 amount is reduced be the amount the cost of the property placed in service exceeds $560,000. Chapter 18 p. 114 In 2011 the AMT exemption amounts are $74,450 for a joint return, $48,450 for a single taxpayer, and $37,225 for a married individual filing separately. If Congress does not act before the end of 2012, these amounts will be $45,000, $33,750, and $22,500 for 2012. p. 122 Nonrefundable personal credits may be used to offset the regular income tax and alternative minimum tax through 2011. Congress may act later in 2012 to extend this to 2012. Copyright 2012 The National Underwriter Company 3
Chapter 20 p. 146 For decedents dying in 2010, the executor of the decedent s estate had a choice regarding basis. The executor could have chosen to have no estate tax apply to the decedent, which would also mean that the basis in property would be subject to the modified carryover basis rules. Or the executor could have chosen to have the estate tax apply, which would mean that the carryover basis rules would apply. Chapter 21 p. 155 The lower capital gains tax rates have been extended through year 2012. Chapter 22 p. 161 In 2012 the standard deduction is $11,900 for a married couple filing jointly, $8,700 for heads of households, $5,950 for other unmarried individuals, and $5,950 for married taxpayers filing separately. In 2012 the 35% tax bracket starts at $388, 350 for both married couples filing jointly and single individuals. In 2012 the personal exemption is $3,800. The phase-out of the personal exemption is not applicable in 2012. The child tax credit remains at $1,000 through 2012. The phase-out of itemized deductions is not applicable in 2012. Chapter 25 p. 184 Lower capital gains rates are available through 2012. Chapter 26 p. 192 In 2011 the AMT exemption amounts are $74,450 for a joint return, $48,450 for a single taxpayer, and $37,225 for a married individual filing separately. If Congress does not act before the end of 2012, these amounts will be $45,000, $33,750, and $22,500 for 2012. p. 195 Nonrefundable personal credits may be used to offset the regular income tax and alternative minimum tax through 2011. Congress may act later in 2012 to extend this to 2012. Chapter 32 p. 266 In 2012 the Traditional and Roth IRA contribution limit is $5,000. In 2012 the IRA Active Participant AGI phase-out ranges are as follows: Single Married Filing Jointly Married Filing Separately 58,000-68,000 92,000-112,000 0-10,000 Copyright 2012 The National Underwriter Company 4
A non-active participant spouse may receive a full IRA deduction if joint income is less than $173,000. The non-active spouse may receive a partial deduction if joint income is between $173,000 and $183,000. In 2012 the limit for SEP contributions rises to $50,000. p. 267 In 2012 the maximum compensation base rises to $250,000. In 2012 the limit for SIMPLE IRA contributions is $11,500. In 2012 the limit for elective deferrals rises to $17,000. The catch-up contribution limit for defined contribution plans remain at $5,500. The limit for annual additions to a defined contribution plan rises to $50,000. p. 268 In 2012 the maximum benefit allowable in a defined benefit plan is $200,000. p. 284 In 2012 The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000. Appendix B p. 293 In 2012 the suggested charitable gift annuity rates are below: Age Rate Age Rate Age Rate 5-10 2.0% 50 3.7 73 5.5 11-15 2.1 51-52 3.8 74 5.7 16-19 2.2 53-54 3.9 75 5.8 20-23 2.3 55 4.0 76 6.0 24-26 2.4 56-57 4.1 77 6.2 27-29 2.5 58 4.2 78 6.4 30-32 2.6 59 4.3 79 6.6 33-34 2.7 60-61 4.4 80 6.8 35-36 2.8 62-63 4.5 81 7.0 37-38 2.9 64 4.6 82 7.2 39-40 3.0 65 4.7 83 7.4 41-42 3.1 66-67 4.8 84 7.6 43 3.2 68 4.9 85 7.8 44-45 3.3 69 5.0 86 8.0 46 3.4 70 5.1 87 8.2 47 3.5 71 5.3 88 8.4 48-49 3.6 72 5.4 89 8.7 90+ 9.0 Copyright 2012 The National Underwriter Company 5
Appendix D p. 297 In 2012 the tax brackets are as follows: JOINT RETURNS AND SINGLE INDIVIDUALS SURVIVNG SPOUSES Taxable Years Beginning in 2012 Taxable Years Beginning in 2012 Tax on Lower Tax Rate on Excess Tax on Lower on Excess $ -0- to $ 8,700 $ -0-10% $ -0- to $17,400 $ -0-10% 8,700 to 35,350 870.00 15% 17,400 to 70,700 1,740.00 15% 35,350 to 85,650 4,867.50 25% 70,700 to 142,700 9,735.00 25% 85,650 to 178,650 17,442.50 28% 142,700 to 217,450 27,735.00 28% 178,650 to 388,350 43,482.50 33% 217,450 to 388,350 48,665.00 33% 388,350 to 112,683.50 35% 388,350 to 105,062.00 35% MARRIED FILING SEPARATELY HEAD OF HOUSEHOLD Taxable Years Beginning in 2012 Taxable Years Beginning in 2012 Tax on Lower on Excess Tax on Lower on Excess $ -0- to $8,700 $ -0-10% $ -0- to $12,400 $ -0-10% 8,700 to 35,350 870.00 15% 12,400 to 47,350 1,240.50 15% 35,350 to 71,350 4,867.50 25% 47,350 to 122,300 6,482.50 25% 71,350 to 108,725 13,867.50 28% 122,300 to 198,050 25,220.00 28% 108,725 to 194,175 24,332.50 33% 198,050 to 388,350 46,430.00 33% 194,175 To 52,531.00 35% 388,350 to 109,229.00 35% ESTATES AND TRUSTS Taxable Years Beginning in 2012 Tax on Lower on Excess $ -0- to $2,400 $ -0-15% 2,400 to 5,600 360.00 25% 5,600 to 8,500 1,160.00 28% 8,500 to 11,650 1,972.00 33% 11,650 to 3,011.50 35% p. 298 In 2012 the income threshold for married person filing jointly is $19,500 (if one spouse is blind or elderly 20,650; if both spouses are blind or elderly 21,800; if both spouses are blind and elderly 24,100). A married taxpayer with gross income of $3,800 or more in 2012 must file a return if he and his spouse are living in different households at the end of the taxable year. The income threshold for a surviving spouse is $15,700 (if elderly or blind $16,850; if elderly and blind - $18,000). Copyright 2012 The National Underwriter Company 6
The income threshold for head-of-household is $12,500 (if elderly or blind - $13,950; if elderly and blind - $15,400). The income threshold for a single person is $9,750 (if elderly or blind - $11,200; if elderly and blind - $12,650). The income threshold for a married individual filing separately who does not itemize is $9,750 (if elderly or blind - $10,900; if elderly and blind ($12,050). If either spouse itemizes - $3,800. Non-resident aliens or those filing a short year return because of a change in accounting period - $3,800. Copyright 2012 The National Underwriter Company 7