The official start of tax filing season for 2012 tax returns will be January 30, 2013. On January 1, 2013 Congress passed the 2012 American Taxpayer Relief Act, which permanently extends the reduced Bush-era income tax rates for lower and middle-income taxpayers, and allows the top rates on earned income, investment income, and estate and gifts to increase from their 2012 levels for more affluent taxpayers. Here are some of the specifics of that new law which affect 2012 tax year:

  • Alternative Minimum Tax relief was made permanent and indexed for inflation after 2012; for 2012 $50,600 for single, $78,750 for married taxpayers.
  • Teacher classroom expenses of $250 as an above-the-line deduction extended through 12/31/13.
  • Mortgage insurance premiums deductibility as qualified residence interest extended through 12/31/13.
  • State and Local sales taxes in lieu of state income taxes deduction extended through 12/31/13.
  • Qualified tuition and related expenses deduction extended through 12/31/13.
  • Tax-free distributions from IRAs to charities for individuals 70 ½ and older extended through 12/31/13
  • Energy property credit for individuals extended through 12/31/13, with $500 lifetime limit.
  • Section 179 limits increased to $500,000 with a $2,000,000 annual maximum through 12/31/13.
  • Mortgage Debt Relief for cancellation of debt on a principal residence extended through 12/31/13.
  • Individual income tax rates of 10%, 25%, 28%, 33% and 35% brackets are extended.
  • No Personal Exemption Phase-out for 2012
  • No Itemized Deduction Limitation for 2012
  • Student Loan Interest extended permanently up to $2500 per year, with no 60 month limitation

    Besides the changes to our Federal rates as a result of this new tax law, California voters approved Proposition 30, which put into affect a retroactive income tax increase. The new maximum marginal rate will be 12.3%, and tax rates for single taxpayers earning over $250,000 (married taxpayers earning over $500,000) will all pay higher tax rates for 2012. Additionally, another 1% Mental Health Services Tax will be added on top of those rates for taxpayers earning over $1,000,000.

    Other tax law changes include the following:

  • Mileage rate for business miles is 55.5 cents; medical and moving miles is 23 cents; charity miles is 14 cents
  • Federal personal exemption for 2012 is $3,800.
  • Federal filing requirements for 2012 for single taxpayers is $9,750 under 65 years old; $11,200 for taxpayers 65 or older; $19,500 for married filing joint both under 65; $20,650 for one spouse 65 or older and $21,800 for both spouses 65 or oders.
  • Federal standard deduction for 2012 is $5,950 for single taxpayers and and Married filing separate; $11,900 for married filing joint taxpayers; $8,700 for taxpayers filing Head of Household
  • Earned income ceiling for Social Security Benefits before full retirement age is $14,640.