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Highlights of Tax Changes for 2012 

 

Provisions that lapsed after 2011

            Many popular tax breaks were not extended in 2011 including write-offs for state sales taxes, college tuition and up to $250 of teachers' classroom supplies.  The $500 credit for energy efficient home improvements has expired while solar credits were not effected.

            Business tax breaks also expired including 100% bonus first-year depreciation, this has been reduced to a 50% write off for assets that are placed in service this year.

 

Social Security

            The wage base rises to $110,100, a $3,300 increase over 2011.  The employee' Social Security tax rake was lowered to 4.2% down from 6.2%.  Self employed tax payers will pay 13.3% on the first $110,100, 2.9% above that.  Social Security benefits are going up 3.6% in 2012.

 

Standard Deduction

            Increased by small amounts, married up to $11,900, single $5,950 and head of household $8,700.  The personal exemption increased to $3,800 per person.

 

Savings Plans

            The maximum 401(k) contribution is $17,000 this year, this is up $500 from last year.  Individuals born before 1963 can put in as much as $22,500.