Here is the late breaking news
During the wee hours of January 1, 2013 the final touches were made to 2012 tax laws. While the rest of us could not realistically make plans during 2012 for laws passed in 2013, perhaps there is a clause or two that may help you when you file your taxes in the next few months. Here is what you need to know:
- Alternative Minimum Tax (AMT). The recently passed tax package includes both a patch for the AMT and a permanent fix to keep the AMT from impacting 20 million plus more taxpayers.
Impact: If you paid AMT in 2011 you will probably pay it once again. If not, you probably won’t …unless your income or deductions change significantly.
- Educators Expense Deduction is back. You may once again deduct up to $250 in out-of-pocket expenses if you are a qualified teacher. This provision also applies to 2013.
Impact: Hopefully you kept track of your out-of-pocket classroom expenses. If not, start digging through your receipts.
- Tuition and Fees Deduction is back. This too was extended from 2011 to 2013.
Impact: One more educational deduction option to consider in addition to the Lifetime Learning Credit, the American Opportunity Credit, Coverdell Savings, 529 plans and more.
- Charitable Contributions from seniors’ qualified retirement plans. This too, expired in 2011 and has been extended through 2013.
Impact: Good luck with this one for 2012 as the change is made after the year ended. Use this as a planning tool for your 2013 donations.
- Itemized Deduction Code Extensions. The optional general sales tax deduction instead of state income tax itemized deduction was extended through 2013. So too is the ability to treat qualified mortgage insurance premiums like qualified interest.
Impact: This should help maximize your itemized deductions. If you made any large purchases during 2012 that paid sales tax you may wish to collect the receipts.
Stay tuned, many more changes were made to tax laws that will impact you in 2013. The changes noted here will have the greatest impact on your 2012 tax liability.
You have until the end of January, 2013 to act
When the recent tax legislation was passed one of the provisions that retroactively goes back to 2012 had no window of opportunity to take advantage of the tax break. The signed legislation provides a small window to make an adjustment to your 2012 charitable contributions if you are over 70 1/2 years old. This is what you need to know.
Looking for a way to reduce your 2012 income? Those who are older than 70 1/2 have an opportunity to make charitable contributions from their qualified individual retirement accounts and have it excluded from 2012 income. Here is what you need to know.
In Section 209 of the recently passed tax legislation there is a provision for qualified seniors to make a direct charitable contribution out of their qualified retirement account and have it count for 2012. The requirements are;
- You must be 70 ½ years old or older.
- You may only make the contribution from a qualified individual retirement account.
- You may treat any qualified charitable distribution made after Dec. 31, 2012 and before Feb. 1, 2013 as deemed to have been made on December 31, 2012.
- If you made a qualified distribution from an individual retirement account in December 2012, the amount is then transferred in cash to a qualified charitable organization prior to February 1, 2013 AND the distribution would meet the other direct contribution requirements you may exclude the distribution from your income.
Other things to know
- There is a small window. If you want to take advantage of this 2012 tax opportunity you must do so by the end of January, 2013.
- There is a limit. Remember this direct charitable contribution is limited to $100,000.
- It must be done correctly. Talk to your plan’s trustee to ensure your contribution is handled correctly.
- What is the benefit? Instead of receiving an itemized deduction for your contribution, qualified direct contributions from your retirement account do not have to be claimed as income. This effectively allows you to receive 100% of the donation as an un-taxable event.
Please recall that this direct charitable contribution for seniors from their qualified retirement account originally expired in 2011. The direct contribution benefit is now extended through 2013.
The health care legislation commonly known as Obama Care has many provisions that are being implemented over a number of years. As we start 2013, it is wise to once again
review the major changes impacting individuals for this year and next.
Read full article HERE.
The AMT Patch Gets Permanently Mended The Alternative
Minimum Tax (AMT) is a classic example of the problem we face when
Washington D.C. passes temporary tax legislation. For the past ten
plus years, our legislators have passed bills that extend a patch to
this parallel income tax calculation within our tax code. In the wee
hours of January 1st, 2013 a permanent fix to the AMT was passed by
Congress. Read full article HERE.
Last year’s intense last minute debate out of Washington focused on an extension of the Social Security tax cut into 2012. Would this year be any more calm? Would 2012 tax laws be locked in place before the end of the tax year? What is going to happen to tax laws in 2013? Long gone are the days when taxes were a simple calculation to ensure there was enough revenue to cover the desired federal programs. Now it seems each section of the code is a political and/or social statement. While our leaders continue to grapple with answers, here are some things to consider to make your situation a little better. Check Your 2013 Pay Stub As you buckle down and try to make plans to accomplish your 2013 resolutions, don’t forget to conduct an annual review of your paycheck. Given the uncertainty of 2013 tax laws, you may need to prepare yourself to conduct this review on numerous occasions throughout the year. CLICK HERE to review Read full article.