As 2011 comes to an end, changes in the tax world seem to be on the horizon. Many individual and business tax incentives are scheduled to expire after 2012. Presidential election years tend to bring change, so it will be interesting to see how everything plays out. The following is a list of tax changes, updates, and items of interest:
- Set to expire after 2011 include the allowance for 100% first-year bonus depreciation (Sec. 168(k)), and the expiration of the increased deduction amounts under Sec. 179. The Sec. 179 expensing limitation for new fixed asset purchases is reduced to $25,000 for 2012.
- The temporary extension of the decreased payroll tax relief is set to expire on February 29, 2012 for the employee’s portion of the tax. Without further legislative action, the rate will then revert back to 6.2%.
- Standard business mileage rates beginning January 1, 2012 have been set at $0.555 per mile for business miles driven, $0.23 per mile driven for medical or moving purposes, and $0.14 per mile driven in service of charitable organizations.
- Social Security benefits will go up 3.6% in 2012 which is the first hike in two years. Earnings limits will also increase. Individuals who turn 66 during 2012 will not lose any benefits if they earn $38,880 or less before reaching that age. Individuals 62 to 66 can make up to $14,640 before losing benefits, and there is no earnings cap once a beneficiary turns 66.
- Retirement plan ceilings increase in 2012. The maximum 401(k), 403(b), and 457 plan contributions rises to $17,000 ($22,500 for individuals age 50 and older). The ceiling for SIMPLEs will remain at $11,500 ($14,000 for individuals age 50 and older).
- Remember, Health Savings Account and IRA contributions can be made until April 17, 2012 as a 2011 contribution. Health Savings Account contribution limits for Self-Only and Family are $3,050 and $6,150, respectively, with a $1,000 additional contribution for individuals 55 or older. Traditional and Roth IRA limits for 2011 are $5,000 with an additional $1,000 for individuals 50 or older.
We at Neil & Company CPAs P.C. will continue to monitor any income tax changes passed during 2012 and will pass those along to you. We look forward to 2012 and promise to continue our commitment to you to provide the most consistent and valuable financial assistance!