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New Year, New Numbers
Taxpayers will have new numbers to consider when planning for 2012. Here are a few of the more significant changes:
UP
• The amount sheltered from gift, estate and generation-skipping transfer tax goes up this year, from $5,000,000 to $5,120,000. Those who have already made gifts to family up to the limit can make additional gifts this year, which will help reduce the size of the estate subject to tax at death.
• The contribution limit for 401(k) plans increases from $16,500 to $17,000. The catch-up contribution remains at $5,500 for workers over age 50.
• The Social Security payroll tax rate applies to income up to $110,100, compared with $106,800 in 2011.
• Social Security recipients will receive a 3.6% cost-of-living adjustment in 2012.
DOWN
• The alternative minimum tax exemption drops to $45,000 for married couples and $33,750 for singles, versus $74,450 and $48,450 respectively in 2011, unless Congress acts.
STUCK IN PLACE
• The annual gift tax exclusion remains at $13,000. You can make as many $13,000 gifts as you wish ($26,000 for married couples) without owing gift tax. A program of lifetime giving can shift income to family members in lower income tax brackets and may reduce future estate taxes.
• The "kiddie tax" will continue to apply to unearned income (interest, dividends, capital gains) in excess of $1,900 for all children under age 18 and certain college students up to age 24.
• The contribution limit for IRAs remains at $5,000, with a $1,000 catch-up for workers age 50 and older.
GONE
• The sales tax deduction, which can be used in lieu of the state and local income tax deduction, has expired.
• Teachers are no longer entitled to a $250 above-the-line deduction for out-of-pocket expenses for classroom materials.
Some expired provisions, along with the higher AMT exemption, may be reinstated during 2012. Your advisers can keep you apprised of any changes.
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