In 2012, Many Tax Benefits Will Increase Due to Inflation Adjustments

By Aleksandr Gershengorn

On October 20, 2011, the Internal Revenue Service announced that due to the inflation, many tax credits and income tax tables will be adjusted for 2012. The increases were greater than the previous two years. Some of the most common deductions affecting 2012 returns filed by taxpayers in 2013 include the following:

  • Personal and dependent exemption will increase from $3,700 to $3,800.
  • The new standard deduction is $11,900 for married couples filing joint return, up $300, $5,900 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200.
  • The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
  • The $2,500 maximum deduction for interest paid on student loans begins to phase out for married taxpayers filing a joint return at $125,000 and phases out completely at $155,000, up from $150,000. For single taxpayers, the phase out ranges remains at the 2011 levels.
  • The maximum earned income tax credit (EITC) for low to moderate income workers and working families rises to $5,891, up from $5,751. The maximum income limit for earned income tax credit rises to $50,270, up from $49,078. The credit for EITC varies by family size, filing status and other factors, with the maximum credit going to joint filers with 3 or more qualifying children.
  • The annual exclusion for gifts remains at $13,000, although the estate and gift lifetime exclusion for decedents dying during 2012 goes up from $5,000,000 to $5,120,000.
  • The elective deferral contribution limit for employees who participate in 401(k), 403(b) or 457(b) plans and the federal government’s Thrift Savings Plan increases from $16,500 to $17,000. The catch-up contribution limit under these plans for taxpayers age 50 and over remains at $5,500.
  • Social Security wage base rises to $110,100, up from $106,800.
  • The additional standard deduction for blind people and seniors remains at $1,150 for married individuals and $1,450 for singles and heads of household.

The Internal Revenue Service gives new figures to many more benefits and deductions, which are not listed here. Please click the following link for more information http://www.irs.gov/pub/irs-drop/rp-11-52.pdf