Tax Law Highlights - 2012

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.

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 AGI phase-out range for tax payers making contributions to their Roths is between $173,000 and $183,000 for jointly filing couples, a $3,000 increase from 2011. The same increase is true for singles filing. The range is $110,000 to $125,000.
Married individual who file separately and have been actively participating in an employer-sponsored retirement plan should see no changes in the phase-out range. It stayed the same as the previous year: $0 to $10,000.

Bonus Depreciation In order to stimulate the economy Congress has enacted special bonus depreciation in the year of acquisition for certain purchases of new tangible personal property.
For qualified property acquired and placed in service in 2016, a 50% bonus first-year depreciation allowance applies under Code Sec. 168(k).

Beginning on January 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
55.5 cents per mile for business miles driven
23 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011.
The medical and moving rate has been reduced by 0.5 cents per mile.

The American Opportunity Tax Credit remains in effect through 2016.
A credit is available up to $2,500 per student for the first 4 years of higher education for tuition, course related books, activity fees and any equipment that must be purchased from the educational institution as a condition of enrollment. Room & Board expenses do not qualify.
The credit begins to phase out for single taxpayers who have adjusted gross income between $80,000 and $90,000 and for joint tax filers when adjusted gross income is between $160,000 and $180,000. The credit is unavailable to taxpayers whose adjusted gross income exceeds the $90,000 and $180,000 thresholds.

Lower Capital Gains and Dividend Tax Rates Extended Through 2012.
The tax rate reductions for long-term capital gains remain in effect for 2011 and 2012.
If tax bracket = 10% or 15% the Short Term CG taxed at ordinary rates
Long Term CG and Qualifing Dividends tax rate = 0%
If tax bracket = greater than 15% the Short Term CG taxed at ordinary rates
Long Term CG and Qualifing Dividends tax rate = 15%

For tax year 2016, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families Maximum Credit Amounts The maximum amount of credit for Tax Year 2016 is: $6,269 with three or more qualifying children
$5,572 with two qualifying children,
$3,373 with one qualifying child
$506 with no qualifying children

The foreign earned-income exclusion amount under tax code Section 911(b)(2)(D)(i) will increase in 2016 to $101,300 from $100,800,