It seems that every year there are new tax reforms and too many changes to keep up with. It might be overwhelming to keep track of them, so we've rounded up some of the tax changes you should know before you file your 2012 tax return:
Temporary tax benefits have been extended
Some temporary tax benefits have been extended for 2013. Check out our list below and click on the hyperlinks that will take you to the official IRS website for more information on each benefit.
- Deduction for educator expenses: If you are an eligible educator, you can deduct up to $250 of any unreimbursed expenses you paid or incurred for school materials.
- Tuition and fees deduction: You can claim up to $4,000. This deduction may apply if you paid tuition for a postsecondary school, including college and university. You cannot claim this with an American Opportunity credit or Lifetime Learning credit.
- Credit for nonbusiness energy property: This is a tax credit of up to $500 for the energy-efficient improvements you made this year and last year on your home. Home improvements include insulation, exterior windows, doors, and roofs and installation of central air conditioner, heat pump, furnace, boiler, water heater, or biomass stove. One important note: the $500 will count toward all claims for the credit dating back to 2006. So if you've already claimed up to $500, then you no longer qualify.
- Election to deduct state and local general sales taxes instead of state and local income taxes: You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040), line 5b. To claim the sales tax, you must itemize, so be sure to check to see which one gives you the better benefits. Opting for general sales tax deduction is worth considering if you made a lot of pricey purchases last year.
- Deduction for mortgage insurance premiums. Your mortgage insurance premium can be deducted if the insurance was issued after 2006 and in connection with home acquisition debt. You can't apply for this if your adjusted gross income is more than $100,000.
- Exclusion from income of qualified charitable distributions. Excludes up to $100,000 of qualified charitable distributions from income, which means you can take your required annual distributions from your IRA and contribute the withdrawals to qualified charitable organizations as a tax-free donation. This really only applies to those who are over the age of 70 1/2.
Standard mileage rates.
The 2012 rate for business use of your car remains the same and is still 55 1/2 cents a mile, while the 2012 rate for use of your car to get medical care has decreased to 23 cents a mile. The 2012 rate for use of your car to move has also decreased to 23 cents a mile.
Read on for more.
The amount you can deduct for each exemption has increased by $100 to $3,800 for 2012. This compares to $3,700 in 2011.
Standard deduction increase
The standard deduction for taxpayers is higher in 2012 than it was for the year before that.
- For single or married filing separately: $5,950 (increase of $150)
- For married filing jointly or qualified widow with dependent child: $11,900 (increase of $300)
- For head of household: $8,700 (increase of $200)
Roth conversions might be taxed
People who converted or rolled over amounts to a Roth IRA in 2010 and did not report the amount on the 2010 return must report half of it on their 2011 return and the rest on their 2012 return.
Schedule 8812, Child Tax Credit
Form 8812, Additional Child Tax Credit, is now called Schedule 8812, Child Tax Credit.
Higher minimum income requirements for filers
The amount required for filing taxes has increased. For example, if you are single and below 65, you have to file if your gross income exceeds $9,750. If you are married, filing jointly, and below 65, you have to file if your total gross income exceeds $19,500. See this table for the new minimum gross income required to file.
Mailing address has changed
If you usually snail mail your tax return, be aware that the address for many filing locations has changed. Check your form for the right address.