Tax Law Highlights - 2012

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.

The credit of $1,000 per eligible child.

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.

New for 2011, 2012 and 2013 is a concept named portability which allows a surviving spouse's estate to use any portion of the exemption amount not used by the other spouse’s estate.
For 2013 the exemption is $5,250.000.

The Federal Estate tax Unified credit has increased to $5,250,000.

For 2012, the Personal and Dependency Exemptions increased by $100 to $3,800.
in 2013 ATRA, permanently extends the repeal of the personal exemption phase-out on incomes at or below $250,000 (individual filers), $275,000 (heads of households) and $300,000 (married filing jointly).,br> Exemptions will be phased out for taxpayers with adjusted gross income (AGI) above the AGI's mentioned above.

IRA Contributions $5,000
IRA Catch-up Contributions $1,000
Defined Benefit Plan Benefit $200,000
Defined Contribution Plan Allocation $50,000
401(K) or 403(b) Salary reduction deferrals $17,000
401(k) or 403(b) Catch-up Contributions $5,500
SIMPLE plans $11,500
SIMPLE plan Catch-up Contributions $2,500
Salary for pension plan $250,000
Salary for highly compensated employee $115,000
Salary for Key employee $165,000
Salary for SEP eligibility $550
Social Security Taxable Wage base $110,100

For a tax year beginning in 2012, the Code Sec.179 expensing election which was supposed to have been reduced to $139,000 was increased under the American Tax Relief Act of 2012. The new law restores the 2011 limits of $500,000 as a maximum deduction with a $2 million threshold through 2013

There is a longer write-off period for certain realty property. For specialized realty assets (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) placed in service after 2011, a 39-year (up from 15-year) write-off period generally applies.