As you know, 2012 is rapidly coming to an end! You should start thinking now about how best to prepare yourself for tax season, which is only a few short months away. We have some great information to get you started.
The first thing you should do is take a look at your income-tax return from last year (Form 1040). Make note of anything that is different since that time (e.g., marriage, house purchase, having a child)—your tax liability will probably be different if anything has changed. Next, determine your filing status and take a look at the chart below to determine what your tax bracket is.
| Tax Rate (in %) |
Income for
Single Person |
Income for Head of Household | Income for Couple Married & Filing Jointly | Income for Person
Married & Filing |
| 10 | $0 – 8,700 | $0 – 12,400 | $0 – 17,400 | $0 – 8,700 |
| 15 | $8,701 – 35,350 | $12,401 – 47,350 | $17,401 – 70,700 | $8,701 – 35,350 |
| 25 | $35,351 – 85,650 | $47,351 – 122,300 | $70,701 – 142,700 | $35,351 – 71,350 |
| 28 | $85,651 – 178,650 | $122,301 – 198,050 | $142,701 – 217,450 | $71,351 – 108,725 |
| 33 | $178,651 – 388,350 | $198,051 – 388,350 | $217,451 – 388,350 | $108,726 – 194,175 |
| 35 | Over $388,350 | Over $388,350 | Over $388,350 | Over $194,175 |
Be sure you have access to all of the paperwork you will need for your 2012 taxes: pay stubs, charitable donation receipts, medical expense verification, retirement savings information, etc. Now is a good time to discover if you are missing anything, since you still have time to get everything together!
Before claiming your college-age child as a dependent on your taxes, make sure he or she still qualifies. Most importantly, if anyone can claim you as a dependent (or your spouse if you are filing jointly), you cannot claim any dependents of your own. The child cannot be older than 24 by the end of the year, must have been enrolled at a school full-time for at least five months of the year, and he or she cannot provide more than half of his or her own financial support. This last requirement can be a little confusing, but just be sure to add up any expenses you incurred as a result of providing support for your child. You can include a portion of your mortgage if he or she did not pay you rent, as well as grocery and utility bills if applicable. Keep in mind that the IRS considers student loans to be part of the child’s income, even if they were spent exclusively on school tuition.
The Bush-era tax cuts are set to expire on January 1, 2013, which would mean that income tax rates and tax rates on capital gains, dividends and estates will revert back to the rates they were under President Clinton. The current gift exemption amount is $5 million, which might revert to $1 million at the beginning of the new year; therefore, now might be your last chance to save on estate and gift taxes.
Additionally, tax rates will be affected by the new Patient Protection and Affordable Care Act beginning in 2013. It might be wise to schedule a meeting with a tax professional to understand and take advantage of all opportunities to save money for 2012.
For even more helpful information, including some small business-related tax information, check out our 2011 year-end checklist here: http://acuityabs.wpengine.com/end-of-year-2011-tax-checklist-2/
