Tax Law Changes

The healthcare reform law passed in 2010 places new limits on the amount employees can put aside in a flexible spending account . Beginning in 2013, workers will be able to put aside only $2,500 in their flexible spending accounts.
After 2013, that $2,500 FSA limit will be adjusted each year for inflation, but it is still a significant drop from the maximum many employers now allow.
The changes to flexible spending accounts starting in 2013 apply whether you use the plan to cover just you or you and your whole family.
Since the combined out-of-pocket healthcare costs for a family could exceed the $2,500 limit, employees who need to save might want to look at opening a health savings account (HSA), as well as a flexible spending account.
With an HSA, you can put aside money and get a deduction when you do your taxes

Retirees under full retirement age (ages 62 -66 ) can earn up to $14,640 without losing benefits. Your Social Security benefits would be reduced by $1 for every $2 you earned over the limit.
In the year you reach full retirement age, $1 for every $3 you earned above the $38,880 limit.
There is no limit when you reach the full retirement age.

Tax Relief for Taxpayers Who Lose Their Homes Due to Foreclosure will remain for one more year. Debt forgiven in connection with the foreclosure of a principal residence will be considered nontaxable

New cars put in service in 2012 and used over 50% for business, bonus depreciation allows a $11,160 first year depreciation limit.
The limit is $3,160 if Bonus depreciation is not used.
Light trucks or Vans put in service in 2012 and used over 50% for business, bonus depreciation allows a $11,360 first year depreciation limit.
The limit is $3,360 if Bonus depreciation is not used.

The Maximum amount of aged based long term care premiums that can be included as deductible medical expenses (subject to the 10 / 7.5 AGI floor) is:
$360 for 40 year olds or younger
$680 for ages 41 through 50
$1,360 for ages 51 through 60
$3,640 for ages 61 through 70
$4,550 for ages over age 70

Taxpayers who transferred their traditional IRAs into Roth IRAs in 2010, and deferred the income must pick up the remaining 50% of the deferred income in 2012.
Taxpayers with modified AGI in excess of $100,000 and taxpayers who are married filing separately are no longer barred from converting traditional IRAs into Roth IRAs.

The First-Time Homebuyer's Credit no longer exists. The First-Time Homebuyer's Credit for homes acquired after 4/8/08 and before 1/1/09 have to be recaptured over a 15 year period.
The 15 year period began in 2010.
Any taxpayer who used the First-Time Homebuyer's Credit in 2010 or 2011 and sold the house in 2012 must recapture the entire credit in 2012.

The Section 179 deduction cannot be used to create or add to a loss.
Income from all trades or businesses in which the taxpayer is engaged is counted in determining the income limitation,
Wages received by taxpayer AND wife from activities unrelated to those created the 179 deduction are treated as income in determining the income limitation.
The maximum deduction allowed in 2012 is the lesser of $500,000 or the Section 179 Income.

The Tax Relief Act of 2010 extended the current tax rate structure through the end of 2012.
For 2012, there will be six tax rate brackets for ordinary income of: 10%, 15%, 25%, 28%, 33%, and 35%.
All taxpayers will pay 35% of any taxable income over $388,350 except MFS pays 35% over $194,175.