IRA contribution limits
The maximum amount you can contribute to a traditional IRA or Roth IRA in 2012 remains at $5,000 (or 100% of your earned income, if less), unchanged from 2011. The maximum catch-up contribution for those age 50 or older remains at $1,000. (You can contribute to both a traditional and Roth IRA in 2012, but your total contributions can't exceed this annual limit.)
Traditional IRA deduction limits for 2012
While the maximum contribution hasn't changed, the income limits for determining the deductivility of traditional IRA contributions have increased (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income ("modified adjusted gross income," or MAGI) is $58,000 or less (up from $56,000 in 2011). If you're married filing a joint return, you can fully deduct your IRA contribution if your MAGI is $92,000 or less (up from $90,000 in 2011). If you're not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $173,000 or less (up from $169,000 in 2011).
If your 2012 federal income tax filing status is:
Your IRA deduction is reduced if your MAGI is between:
Your deduction is eliminated if your MAGI is:
Single or head of household$
58,000 - $68,000
$68,000 or more
Married filing jointly or qualifying widow(er)*
$92,000 - $112,000 or more (combined)
$112,000 or more (combined)
Married filing separately
$0-$10,000
$10,000 or more
*If you're not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $173,000 to $183,000, and eliminated if your MAGI exceeds $183,000.
Roth IRA contribution limits for 2012
The income limits for determining how much you can contribute to a Roth IRA have also increased. If your filing status is single/head of household, you can contribute the full $5,000 to a Roth IRA in 2012 if your MAGI is $110,000 or less (up from $107,000 in 2011). And if you're married filing a joint return, you can make a full contribution if your MAGI is $173,000 or less (up from $169,000 in 2011). (Again, contributions can't exceed 100% of your earned income.)
If your 2012 federal income tax filing status is:Y
our Roth IRA contribution is reduced if your MAGI is:
You cannot contribute to a Roth IRA if your MAGI is:
Single or head of household
More than $110,000 but less than $125,000
$125,000 or more
Married filing jointly or qualifying widow(er)
More than $173,000 but less than $183,000 (combined)
$183,000 or more (combined)
Married filing separately
More than $0 but less than $10,000
$10,000 or more
Employer retirement plans
The maximum amount you can contribute (your "elective deferrals") to a 401(k) plan has increased for 2012. The limit (which also applies to 403(b), 457(b), and SAR-SEP plans) is $17,000 in 2012 (up from $16,5000 in 2011). If you're age 50 or older, you can also make catch-up contributions of up to $5,5000 to these plans in 2012 (unchanged from 2011). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)
If you participate in more than one retirement plan, your total elective deferrals can't exceed the annual limit ($17,000 in 2012 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan--a total of $34,000 in 2012 (plus any catch-up contributions).
The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2012 remains at $11,500 ($14,000 if you're age 50 or older), unchanged from 2011.
Finally, the maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2012 is $50,000 (up from $49,000 in 2011), plus age-50 catch-up contributions. (This includes both you contributions and your employer's contributions. Special rules apply if your employer sponsors more than one retirement plan.)
Plan type:
Annual dollar limit:
Catch-up limit:
401(l), 403(b), govt. 457(b), SAR-SEP
$17,000
$5,500
SIMPLE plans
$11,500
$2,500
Note: Contributions can't exceed 100% of your income.
Income tax rates
The Act extends existing federal income tax rates for 2 additional years. As in 2010, the federal tax bracket rates for 2011 and 2012 will be 10%, 15%, 25%, 28%, 33%, and 35%. (Without this legislation, federal income tax rates would have increased beginning in 2011--the current 10% federal income tax bracket would have disappeared, and the five remaining tax brackets would have been 15%, 28%, 31%, 36%, and 39.6%.)
Tax rates for long-term capital gain and qualifying dividends
Existing tax rates for long-term capital gains and qualifying dividends are also extended through 2012. As a result, long-term capital gain and qualifying dividends will continue to be taxed at a maximum rate of 15%. For individuals in the 10% or 15% marginal income tax bracket, a special 0% rate will generally continue to apply.
Alternative minimum tax (AMT)
The Act includes another temporary "patch" for the AMT--this one good for 2010 and 2011. AMT exemption amounts are slightly increased, and personal nonrefundable tax credits will be allowed to offset AMT liability through 2011.
Estate tax
The Act makes several major-- though temporary-- changes to the federal estate tax, including:
The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 allowed an additional 50% depreciation deduction for qualifying property placed in service during 2008 and 2009. This additional depreciation deduction was allowed for purposes of the alternative minimum tax (AMT) calculation, as well as regular tax. The Small Business Jobs Act extended the 50% additional first-year depreciation deduction for one year to apply to qualified property acquired and placed in service during 2010.
This Act increases the bonus depreciation percentage to 100% for property acquired and placed in service after September 8, 2010 and before January 1, 2012. The Act extends bonus depreciation at the 50% level through 2012 (50% bonus depreciation will apply for property placed in service after December 31, 2011, and before January 1, 2013).
IRC Section 179 expense limits
Section 179 of the Internal Revenue Code allows businesses to elect to deduct the cost of depreciable tangible personal property acquired for use in the business in the year of purchase, rather than through depreciation deductions. Since 2003, several pieces of legislation have temporarily expanded the limits that apply to Section 179.
Most recently, the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 increased the maximum amount that can be expensed to $250,000 for tax years beginning in 2008 and 2009. This amount was reduced by the amount by which the cost of qualifying property placed in service during the year exceeded $800,000. For tax years 2010 and 2011, the Small Business Jobs Act increased the maximum amount that may be expensed under Section 179 to $500,000 and increased the phase-out threshold amount to $2 million.
For 2012, the dollar limit amount and phase-out threshold level were scheduled to drop to $25,000 and $200,000, respectively. This Act sets the IRC Section 179 expense limit for 2012 at its 2007 level--$125,000, with a phase-out threshold of $500,000--indexed for inflation.
Small business stock exclusion
Noncorporate investors may generally exclude 50% of any capital gain from the sale or exchange of qualified small business stock (generally, stock issued by domestic C corporations whose assets do not exceed $50 million) issued after August 10, 1993 (if a five-year holding period requirement and other requirements are met). The Small Business Jobs Act temporarily increased the exclusion percentage for qualified small business stock acquired during 2010 to 100%, and does not treat the excluded gain as an alternative minimum tax preference. Therefore, no regular tax or alternative minimum tax is imposed on the sale of qualified small business stock issued and acquired after September 27, 2010, and before January 1, 2011, and held at least five years.
This Act extends the 100% exclusion for one year--to qualifying stock acquired before January 1, 2012, and held for more than five years.
Education provisions
Provisions extended through 2012 include:
The maximum amount you can contribute to a traditional IRA or Roth IRA in 2012 remains at $5,000 (or 100% of your earned income, if less), unchanged from 2011. The maximum catch-up contribution for those age 50 or older remains at $1,000. (You can contribute to both a traditional and Roth IRA in 2012, but your total contributions can't exceed this annual limit.)
Traditional IRA deduction limits for 2012
While the maximum contribution hasn't changed, the income limits for determining the deductivility of traditional IRA contributions have increased (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income ("modified adjusted gross income," or MAGI) is $58,000 or less (up from $56,000 in 2011). If you're married filing a joint return, you can fully deduct your IRA contribution if your MAGI is $92,000 or less (up from $90,000 in 2011). If you're not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $173,000 or less (up from $169,000 in 2011).
If your 2012 federal income tax filing status is:
Your IRA deduction is reduced if your MAGI is between:
Your deduction is eliminated if your MAGI is:
Single or head of household$
58,000 - $68,000
$68,000 or more
Married filing jointly or qualifying widow(er)*
$92,000 - $112,000 or more (combined)
$112,000 or more (combined)
Married filing separately
$0-$10,000
$10,000 or more
*If you're not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $173,000 to $183,000, and eliminated if your MAGI exceeds $183,000.
Roth IRA contribution limits for 2012
The income limits for determining how much you can contribute to a Roth IRA have also increased. If your filing status is single/head of household, you can contribute the full $5,000 to a Roth IRA in 2012 if your MAGI is $110,000 or less (up from $107,000 in 2011). And if you're married filing a joint return, you can make a full contribution if your MAGI is $173,000 or less (up from $169,000 in 2011). (Again, contributions can't exceed 100% of your earned income.)
If your 2012 federal income tax filing status is:Y
our Roth IRA contribution is reduced if your MAGI is:
You cannot contribute to a Roth IRA if your MAGI is:
Single or head of household
More than $110,000 but less than $125,000
$125,000 or more
Married filing jointly or qualifying widow(er)
More than $173,000 but less than $183,000 (combined)
$183,000 or more (combined)
Married filing separately
More than $0 but less than $10,000
$10,000 or more
Employer retirement plans
The maximum amount you can contribute (your "elective deferrals") to a 401(k) plan has increased for 2012. The limit (which also applies to 403(b), 457(b), and SAR-SEP plans) is $17,000 in 2012 (up from $16,5000 in 2011). If you're age 50 or older, you can also make catch-up contributions of up to $5,5000 to these plans in 2012 (unchanged from 2011). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)
If you participate in more than one retirement plan, your total elective deferrals can't exceed the annual limit ($17,000 in 2012 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan--a total of $34,000 in 2012 (plus any catch-up contributions).
The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2012 remains at $11,500 ($14,000 if you're age 50 or older), unchanged from 2011.
Finally, the maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2012 is $50,000 (up from $49,000 in 2011), plus age-50 catch-up contributions. (This includes both you contributions and your employer's contributions. Special rules apply if your employer sponsors more than one retirement plan.)
Plan type:
Annual dollar limit:
Catch-up limit:
401(l), 403(b), govt. 457(b), SAR-SEP
$17,000
$5,500
SIMPLE plans
$11,500
$2,500
Note: Contributions can't exceed 100% of your income.
Income tax rates
The Act extends existing federal income tax rates for 2 additional years. As in 2010, the federal tax bracket rates for 2011 and 2012 will be 10%, 15%, 25%, 28%, 33%, and 35%. (Without this legislation, federal income tax rates would have increased beginning in 2011--the current 10% federal income tax bracket would have disappeared, and the five remaining tax brackets would have been 15%, 28%, 31%, 36%, and 39.6%.)
Tax rates for long-term capital gain and qualifying dividends
Existing tax rates for long-term capital gains and qualifying dividends are also extended through 2012. As a result, long-term capital gain and qualifying dividends will continue to be taxed at a maximum rate of 15%. For individuals in the 10% or 15% marginal income tax bracket, a special 0% rate will generally continue to apply.
Alternative minimum tax (AMT)
The Act includes another temporary "patch" for the AMT--this one good for 2010 and 2011. AMT exemption amounts are slightly increased, and personal nonrefundable tax credits will be allowed to offset AMT liability through 2011.
Estate tax
The Act makes several major-- though temporary-- changes to the federal estate tax, including:
- For 2011 and 2012, the estate tax exemption amount (the applicable exclusion amount) will be $5 million per person (the $5 million will be indexed for inflation in 2012); the top estate and gift tax rate for these years will be 35%
- The $5 million exemption amount and 35% top estate tax rate will apply retroactively to 2010 as well, but for individuals who died in 2010, an election can be made to choose the estate tax provisions effective prior to this legislation (i.e., no estate tax, but modified carryover basis rules); an extended due date is provided for individuals who died on or after January 1, 2010, but before December 17, 2010.
- Beginning in 2011, the gift tax (reunified with the estate tax) will have a $5 million dollar exemption amount; the generation-skipping transfer tax, with a $5 million exemption effective January 1, 2010, will have a 0% tax rate for 2010, and a 35% rate for 2011 and 2012.
- For 2011 and 2012, when one spouse dies, any unused portion of that spouse's estate tax exemption amount may be transferred to the surviving spouse
The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 allowed an additional 50% depreciation deduction for qualifying property placed in service during 2008 and 2009. This additional depreciation deduction was allowed for purposes of the alternative minimum tax (AMT) calculation, as well as regular tax. The Small Business Jobs Act extended the 50% additional first-year depreciation deduction for one year to apply to qualified property acquired and placed in service during 2010.
This Act increases the bonus depreciation percentage to 100% for property acquired and placed in service after September 8, 2010 and before January 1, 2012. The Act extends bonus depreciation at the 50% level through 2012 (50% bonus depreciation will apply for property placed in service after December 31, 2011, and before January 1, 2013).
IRC Section 179 expense limits
Section 179 of the Internal Revenue Code allows businesses to elect to deduct the cost of depreciable tangible personal property acquired for use in the business in the year of purchase, rather than through depreciation deductions. Since 2003, several pieces of legislation have temporarily expanded the limits that apply to Section 179.
Most recently, the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 increased the maximum amount that can be expensed to $250,000 for tax years beginning in 2008 and 2009. This amount was reduced by the amount by which the cost of qualifying property placed in service during the year exceeded $800,000. For tax years 2010 and 2011, the Small Business Jobs Act increased the maximum amount that may be expensed under Section 179 to $500,000 and increased the phase-out threshold amount to $2 million.
For 2012, the dollar limit amount and phase-out threshold level were scheduled to drop to $25,000 and $200,000, respectively. This Act sets the IRC Section 179 expense limit for 2012 at its 2007 level--$125,000, with a phase-out threshold of $500,000--indexed for inflation.
Small business stock exclusion
Noncorporate investors may generally exclude 50% of any capital gain from the sale or exchange of qualified small business stock (generally, stock issued by domestic C corporations whose assets do not exceed $50 million) issued after August 10, 1993 (if a five-year holding period requirement and other requirements are met). The Small Business Jobs Act temporarily increased the exclusion percentage for qualified small business stock acquired during 2010 to 100%, and does not treat the excluded gain as an alternative minimum tax preference. Therefore, no regular tax or alternative minimum tax is imposed on the sale of qualified small business stock issued and acquired after September 27, 2010, and before January 1, 2011, and held at least five years.
This Act extends the 100% exclusion for one year--to qualifying stock acquired before January 1, 2012, and held for more than five years.
Education provisions
- The Act extends the American Opportunity tax credit (known as the Hope tax credit before being significantly-- though temporarily--modified by the American Recovery and Reinvestment Act of 2009). The American Opportunity Tax Credit's higher maximum credit amount, increased income limits, expanded applicability to the first four years of college, and potential refundability, available in 2009 and 2010, are extended through 2012.
- The current rules that apply to Coverdell Education Savings Accounts (e.g., $2,000 annual contribution limit, education expenses expanded to include elementary and secondary school expenses) are also extended through 2012. Without this change, the annual contribution limit would have dropped to $500 beginning January 1, 2011
- For the student loan interest deduction, increased income limits and the suspension of the 60-month rule, which would have expired at the end of 2010, are extended for 2 years (the deduction was, prior to 2001, limited to interest paid in the first 60 months of repayment)
- The deduction for qualified higher education expenses, which expired at the end of 2009, is retroactively reinstated for 2010, and extended through 2011.
Provisions extended through 2012 include:
- Itemized deductions and personal and dependency exemptions will not be reduced for higher-income individuals
- "Marriage penalty" relief in the form of an expanded 15% tax bracket and an increased standard deduction amount for married individuals filing jointly
- Exclusion of up to $5,250 in employer-provided education assistance for undergraduate and graduate education
- Increased earned income tax credit (EITC) for families with 3 or more children, and increased EITC income limits for married couples filing jointly
- Increased child tax credit amount with expanded refundability (15% of earnings above $3,000)
- Expanded credit for child and dependent care expenses (increased limit on eligible expenses and maximum credit percentage)
- An increased adoption tax credit and employer-paid adoption assistance exclusion amount; the credit also remains refundable
Securities offered through Girard Securities, Inc., a registered broker-dealer and member FINRA/SIPC. Advisory services offered through Turning Point Financial Advisors, a Registered Investment Adviser not affiliated with Girard Securities, Inc.
© 2010 Turning Point Financial Advisors. All rights reserved.Privacy Policy
Disclosures
© 2010 Turning Point Financial Advisors. All rights reserved.Privacy Policy
Disclosures