Wednesday, May 9, 2012, AM | Leave Comment
The tax season is long passed its 17th April deadline. The sweating of your palms has dried up. Sweaty palms are thought to be the result of a hyperactive nervous system. Tax season is known to be one of the biggest reasons for having sweaty palms. We should all be glad that it’s all over unless you have filed for automatic extension the IRS gives for 6 months.
That would extend your tax return filing to October 15 of this year. Be prepared to have sweaty palms as the deadline gets closer to October 15.
When you do your taxes next year, the value of exemptions and deduction will have changed which are already in effect for next year.
If you do not itemize your deductions, you may claim the standard deduction which varies according to your filing status. The 2012 standard deduction amount for filing jointly is $11,900.
If you use the standard deduction you are allowed an additional amount of $1,150 ($1,450 for single or head of household) per individual as an increase to the standard deduction if you and/or your spouse are 65 or over.
An addition to the standard deduction in the same amount is also allowed for each individual if you and/or your spouse are blind
Itemized Deduction Phaseout
In years before 2010, the benefit of itemized deductions has been reduced at higher income levels through a phaseout calculation. The current tax law stops the itemized deduction phaseout for both 2011 and 2012.
Personal Exemption Amount
In 2012, you will be allowed to deduct $3,800 for each person claimed on your return.
Standard Mileage Rate
The 2012 standard mileage rate allowed for the business use of a vehicle will be 55.5 cents per mile. The rate for use of your car to get medical care or for figuring deductible moving expenses will be 23 cents per mile. The mileage rate for charitable purposes will be 14 cents per mile.
Social Security Maximum
The maximum amount of wages or self-employment earnings that will be subject to the social security tax will be $110,100 in 2012, an increase of $3,300 over the last two year’s maximum.
It’s A Win-Win-Win Situation
Give your excess clothing and household items to charity. By donating your unwanted items, you may be entitled to deduct as an itemized deduction on your return the fair market value of the items donated.
It is a great way to clean out your closets, help a worthwhile charity, and get a tax break.
Make sure to keep some documentation of what items were donated and get a dated receipt from the organization showing a donation was made. Items donated must be in good used condition or better to be deductible.
General Sales Taxes
The option for taxpayers to deduct state and local general sales tax as an itemized deduction expired at the end of 2011. This is an alternative to being able to deduct state and local income tax paid in the applicable year. Unless extended by the legislature this deduction will not be available for 2012.
The maximum section 179 deduction you can elect for property placed in service in 2012 will be $125,000. This amount will be reduced when the cost of section 179 property placed in service during the year exceeds $500,000.
For years beyond 2012 a lower maximum dollar limit is to be $25,000 with the amount being reduced when the cost of section 179 exceeds $200,000.
In a Nutshell
Be aware of the tax issues described above.