Federal Income Tax Filing Deadline

The federal income tax filing deadline for the tax year 2011 is April 17, 2012, which is a Tuesday.  The deadline was pushed back from Monday, April 16th because the District of Columbia is celebrating Emancipation Day.  State filings are still due on April 16, 2012.

In this publication, the discussion will apply to changes effective with the 2012 tax year, which then become part of a taxpayer's federal income tax filing in April 2013. 

Social Security and Medicare

For 2012, the Medicare tax remains at 1.45% of all taxable income, while Social Security returns to 6.20% on February 29, 2012 (a 2 month extension of the 2% tax break).  For the first time in three years the wage limit, or Social Security maximum, increases from $106,800 to $110,100.  The Cost of Living Adjustment (COLA) was 3.6% in 2012, raising the SSI limit to $2,513 per month.

Standard Deductions in 2012

According to the IRS, approximately two out of every three taxpayers claim the standard deduction on their income tax returns.  In 2012, there was a change to the standard deduction amounts for all individual taxpayers, including:

• Single:  $5,950, an increase of $150
• Married Filing Separately:  $5,950, an increase of $150
• Head of Household:  $8,700, an increase of $200
• Married Taxpayers Filing Jointly and Qualifying Widow(er)s:  $11,900, an increase of $300

Exemption Values

The amount you can deduct for each exemption claimed on a federal income tax return in 2012 also went up from the 2011 value.  The 2012 exemption of $3,800 represents a $100 increase from the 2011 amount.

Mileage Deduction Rates

Studies funded by the IRS demonstrate that it continues to be more expensive to drive a car in 2012.  The standard mileage deduction rates for the tax year 2012 appear in the following table:

Mileage Deduction Rates 2012

2012 Increase to Earned Income Credit

The earned income credit applies to working taxpayers that have earned income falling below certain thresholds.  The qualification threshold depends on the number of persons in each family.  The thresholds in 2012 to qualify for this credit include:

• No Children:  earnings must be less than $13,980 or $19,190 if married filing jointly.
• One Child:  earnings must be less than $36,920 or $42,130 if married filing jointly.
• Two Children:  earnings must be less than $41,952 or $47,162 if married filing jointly.
• Three or More Children:  earnings must be less than $45,060 or $50,270 if married filing jointly.

The tax credits themselves have also increased in 2012, with the maximum credits that can be received as indicated below:

• No Children:  $475
• One Child:  $3,169
• Two Children:  $5,236
• Three or More Children:  $5,891

Lifetime Learning and Hope Credits

The maximum Hope Credit, available for the first two years of post-secondary education, remains at $2,500 in 2012.  This includes 100% of qualifying tuition and related expenses not in excess of $2,000, plus 25% of those expenses that do not exceed $4,000.

The maximum Lifetime Learning Credit is $2,000 in 2012.  The credit applies to 20% of the first $10,000 of a taxpayer's out-of-pocket expenses for all students attending an institution of higher education.  A taxpayer cannot claim the Hope Credit and the Lifetime Learning Credit in the same tax year for the same student.

In 2012, the taxpayer's modified adjusted gross income is used to determine the reduction in the amount of the Hope Scholarship and Lifetime Learning Credits.  Credit reductions start for taxpayers with an AGI in excess of $80,000, or $160,000 for those filing joint returns for the Hope Credit.  The income threshold for the Lifetime Learning Credit increases to $52,000 or $104,000 for those filing joint returns in 2012.

Contributions to Retirement Accounts

Contribution limits for 401k as well as 403b plans increased by $500 to $17,000 in 2012.  Catch up contributions remain at $5,500.  Contribution limits to SIMPLE retirement plans remain at $11,500, as does the catch up contribution limit of $2,500.  Although this contribution limit can be adjusted for inflation, it has not increased over the last three years.

The income limits for individuals willing to contribute to traditional IRAs as well as Roth IRA plans increased modestly again in 2012.  The income phase-out threshold for Roth IRAs now starts at $173,000 for those filing joint returns, which is an increase of $4,000.  The phase-out threshold for taxpayers filing their tax returns as head of household or single is now $110,000, which is a $3,000 increase over last year's value.

If you're covered by a retirement plan at work, and you are considering contributing to a tax-deductible traditional IRA, then the 2012 income phase-out limits start at $92,000 for joint filers (an increase of $2,000 from 2011), and increases to $58,000 for those with a filing status of single or head of household (an increase of $2,000 from 2011).