2012 Tax Update

2012 Tax Facts Chart

As always, we are here to assist you with navigating the ever-changing sea of tax law. 

We have enclosed a chart for your use which lists the various federal, state, and local tax rates and limits for payroll taxes and individual income taxes, based on the laws as they exist today.  Naturally, we will inform you should any of these items change. In particular, Congress continues to grapple with the FICA payroll tax cut. Under current law, the employee's withholding rate reverts to 6.2% after February 29, 2012 (up from 4.2%).  The enclosed chart reflects the current split rate period.  

Even without the FICA rate issue, Congress still has to deal with popular tax breaks which expire at the end of 2011. For individuals, these include extending the AMT patch (the patch prevents millions of middle income taxpayers from becoming subject to alternative minimum tax (AMT)), extending the option to deduct state and local sales tax in lieu of state and local income taxes, extending the above-the-line deduction for higher education expenses, and continuing to allow taxpayers over the age of 70 1/2 to make tax-free distributions from IRAs to charities. Businesses face the expiration of 100% bonus depreciation, reduced Section 179 expensing and the expiration of the research tax credit unless Congress acts to extend these provisions for year 2012.

Looking beyond 2012, there is major uncertainty concerning the fate of the Bush tax cuts, especially the low tax rates for capital gains and qualified dividends. These and the current favorable Estate and Gift Tax rates and limits will expire at the end of 2012.  In addition, taxpayers will face even higher tax rates in 2013 because of additional tax increases which take effect in 2013. These include a 3.8% tax surcharge on net investment income for higher income taxpayers and more limits on the deductibility of itemized deductions. Whether Congress chooses to extend or amend these provisions or perhaps completely overhaul the present tax system makes tax planning even more of a challenge.  

We at Wouch, Maloney & Co., remain committed to steering your financial ship across these turbulent seas. Should you have any questions on these or other matters affecting you or your business, please call our tax manager, Terry Martin, who will be glad to assist you.  Also, we encourage our clients to use their tax organizers to help gather all of the pertinent information for their individual tax returns and supply us with that information as early as possible.

Reminders:


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