Below are a list of frequently asked questions regarding tax policies, limits, and amounts.
What is the IRS Mileage Allowance?
In 2012, a taxpayer can take a deduction of 55.5¢ per mile for business miles driven, 23¢ per mile driven for medical or moving purposes, and 14¢ per mile driven in service of charitable organizations.
What is the amount of personal and dependent exemption?
For tax year 2012, the exemption is valued at $3,800.
How about the standard deduction?
The standard deduction depends on your filing status, age and whether or not you are legally blind. In general, the standard deductions for 2012 are as follows:
Single taxpayer: $5,950
Married filing joint (and surviving spouse): $11,900
Married filing separate: $5,950
Head of household: $8,700
Am I subject to the Alternative Minimum Tax (AMT)?
Every individual is subject to the AMT. Each of us has, in addition to our regular taxable income, our Alternative Minimum Taxable Income. If the Alternative Minimum Tax is higher than our regular tax we are subject to that higher number. Fortunately the AMT doesn’t catch most of us. However in 1997 the AMT caught almost 600,000 taxpayers. That was an increase of more than 400,000 since 1990. There were about 1,000,000 taxpayers snared in the AMT in 2000, double that for 2001, 3,500,000 for 2003 and more in the future. Not knowing about the AMT can hurt you.
How much can I defer into my 401(k) Plan?
The dollar amount for 2012 is $17,000 with a $5,500 maximum catch-up contribution if you are 50 or older. While the total deferral could not exceed 15% of your compensation for 2001, that limit was deleted for 2002 and thereafter. These rules are complex and somewhat tricky. Check with your personal advisor before taking any action.
What size gift can I give to my children/grandchildren without having to report to the IRS?
For 2012 the amount is $13,000. This means each of us can give up to $13,000 individually, to as many individuals as we wish to without having to report anything. If we go over the $13,000 to any one individual we have to notify the IRS by filing a Gift Tax Return on IRS Form 709. Even then we don’t have to pay any taxes. But our lifetime gift and estate exclusion is reduced by the amount that our gifts exceed $13,000 per individual donee.
Qualified Transportation Fringe
The 2012 monthly limitation regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $230. An additional $230 per month may be excluded for parking benefits – up to a maximum of $460 per month.
Income from US Savings Bonds for Taxpayers Who Pay Higher Education Expenses
For 2012 the exclusion begins to phase out for modified adjusted gross income above $109,250 for joint returns and $72,850 for other returns. This exclusion completely phases out for modified adjusted gross income of $139,250 or more for joint returns and $87,850 or more for other returns.
Election to Expense Certain Depreciable Assets
For 2012, the aggregate cost of any Section 179 property a taxpayer may elect to treat as an expense may not exceed $139,000. This limitation is reduced (but not below zero) by the amount by which the cost of Section 179 property placed in service during the taxable year exceeds $560,000.
Medical/Health Savings Accounts
In 2012, for self-only coverage, a health plan that has an annual deductible that is not less than $2,100 and not more than $3,150, and under which the out of pocket expenses required to be paid for covered benefits do not exceed $4,200. In 2012, for family coverage, a health plan that has an annual deductible that is not less than $4,200 and not more than $6,300, and under which the out of pocket expenses required to be paid for covered benefits do not exceed $7,650.
How much money can I earn without cutting into my Social Security Benefits?
If you are under full retirement age when you start getting your Social Security payments, $1 in benefits will be deducted for each $2 you earn above the annual limit. For 2012, that limit is $14,640.
In the year you turn full retirement age, $1 in benefits will be deducted for each $3 you earn above a different limit, but only counting earnings before the month you reach the full benefit retirement age. If you reached full retirement age during 2012, the limit on your earnings before reaching full retirement is $38,880.
Starting with the month you reach full retirement age, you will get your benefits with no limit on your earnings.
Note: For retirees born in 1940, full retirement age is 65 and 6 months, for those born in 1941, it is 65 and 8 months. Full retirement age will gradually increase to age 67 for those born in 1960 and later. Also important to remember, when you continue to work while you are collecting benefits, the SSA reviews your record every year to see if those additional earnings will increase your monthly payment. If there is an increase, the SSA will send you a notice of your new benefit amount. Check the Social Security website for more details.
Disclaimer: The data provided on this page is for information purposes only, and should not be used in preparing any financial statements, tax returns, or other official documents. You should always consult a professional to confirm this and other information prior to preparing any official documents. The data provided on this page should not be considered financial advice or guidance.