IMPORTANT TAX PLANNING TIPS FOR FILING YOUR 2012 PERSONAL TAX RETURN
exemption increases to
deductions based on filing status are $5,950 for single,
$5,950 for married filing separately, $11,900 for married
filing joint, and $8,700 for head of household. Standard
business mileage rates are 55.5 cents per mile, 23.0 cents
per mile for medical or moving, and 14 cents per mile for
Expired items as of 12/31/11 include the non-business energy property credit, the tuition expense deduction, deductibility of mortgage insurance premium as an itemized deduction, the educator’s expense deduction of up to $250, and the energy efficient home credit. These items are not applicable on a 2012 tax return.
accurate records of charitable
donations, even those under $250. All contributions of over
$250 each must be supported by documentation from the
receiving charitable organization. IRS is cracking down on
frivolous charitable deductions. All cash contributions will
now require a cancelled check or a receipt from the qualified
charity. Look for the Salvation Army or Goodwill Industries
valuation guide for a list of fair market values on various
items. If your item is not listed Goodwill Industries has
suggested taking 33% of the original cost. Non-cash donations
of clothing or household items must now be in good or better
condition. Be sure to provide description of each item,
original cost, date acquired, date of contribution, FMV,
along with the valuation method used. If you volunteer for a
charitable organization, and you buy supplies, the cost is
deductible. If you wear a uniform or special equipment for
example as a hospital volunteer, the costs for apparel and
cleaning bills can qualify as charitable
Lower Capital Gain and Dividend rates extend through 12/31/12. Tax rates of 5% and 15% for capital gains and dividends are extended through 12/31/12. A 0% federal income tax rate on long-term capital gains and qualified dividends is still in effect for 2012. This special rate applies to gains and dividends that are received by taxpayers in the 10% and 15% regular income tax brackets. If you do not fall into the 15% bracket you might consider gifting appreciated shares to family members in lower tax brackets.
PAV Note: The 2012 “Gift tax exclusion“ of $13,000 increases to $14,000 for year 2013.
Please note the "Kiddie Tax Rules". The “Kiddie tax” will include children age 18 and children who are full-time student ages 19-23 who do not provide more than half of their own support with earned income. The investment income limit for 2012 is $1,900 and the election to report income on a parent’s return is available if the child's gross income is less than $9,500.
PAV Note: "Child and Dependent Care Credit" might apply to summer day camp.
The form 8938 “Statement of Specific Foreign Financial Assets” must be filed to disclose foreign assets of over $50,000 or $100,000 if married filing joint. These reporting requirements are in addition to form TC F 90-22.1, Report of Foreign Bank and Financial Accounts, which applies when a U.S. person has a financial interest in, or a signature authority over, foreign financial accounts that exceed $10,000.
Some tax benefits that you might overlook include "Mortgage refinancing points". If you refinance your house or buy a second residence, the loan points that you pay can be deducted ratably each year over the life of the loan. If you sell the home or refinance again before you have deducted the full amount of the points, you can deduct the remaining amount in the year of refinancing or sale.
The American Opportunity credit allows for a credit of up to $2500 for up to four years for post-secondary education for the 2012 tax year. This credit is now refundable and "course materials" are included as qualifying expenses. The Lifetime Learning credit is 20% of the first $10,000 of qualified expenses and there is no limit on the number of years that this credit can be taken for each student.
The required minimum distribution (RMD), for
those over age 70 1/2, is required for the
2012 tax year. The distribution amount is calculated per
applicable IRS life expectancy tables.
You have until 4/15/13 to make IRA contributions for 2012. You may be able to take advantage of a maximum IRA contribution of typically $5,000, but if you turn age 50 during 2012 a higher maximum contribution of $6,000 is permitted. Be sure to consider other types of retirement plans such as SEP, Simple IRA, 401(k), defined contribution, defined benefit or other plans that may be available or applicable to your situation.
YEAR END TAX CHECKLIST
* Review investments and determine whether to liquidate any holdings.
* Estimate your tax liability and determine if estimated tax payments should be made.
* Conduct a final tax planning review to reduce current year taxes.
* Make any final year end cash or non-cash contributions.
* Make final retirement plan contributions or distributions.
* Think about making any final gifts to meet your annual gift giving limits.
* Begin initial review to organize your tax records.
* Call us with any questions or concerns.
* Check our website for information.
You may qualify for a variety of tax credits.
* Earned Income Credit - for low-income working families.
Maximum credit range is $3,230 to $6,003.
* Child & Dependent Care Credit - for expenses for care of children under age 13.
* Child Tax Credit - a maximum credit of $1,000 for each qualifying child under age 18.
* Additional Child Tax Credit – this credit is refundable.
* Adoption Credit - a credit of up to $12,650+ for qualifying expenses paid to adopt a child.
The 2012 adoption credit is non-refundable.
* Credit for the Elderly and Disabled
* American Opportunity Credit - a max credit of up to $2,500 for the first four years of post-secondary education
* Lifetime Learning Credit
filing due date for filing 2012 tax returns
Monday April 15th 2013.
Tax organizers are mailed out in mid-December. If you did not receive one, please let us know and we will forward one to you immediately. Electronic organizers are also available upon request. In closing, we want to thank everyone for your continued use of our services and your many referrals.
Best wishes for the New Year.
PETER A VASS CPA INC