Friday, October 21, 2011

IRS Guidelines for 2012

The IRS has issued some announcements on updated regulations for 2012, and there is some good news in there for retirement savings. The limit on 401(k)s has been raised from $16,500 this year to $17,000 next year, so you will be able to put away another $500 tax-free. That applies to 403(b) plans, for people who work for nonprofits, as well.

There are also some cost-of-living adjustments that should provide a small amount of tax relief for high-income taxpayers. The personal exemption will rise from $3,700 to $3,800, and the standard deduction for married couples will go up from $11,600 to $11,900. And the 35 percent top bracket will now apply to incomes of $388,350 and higher, up from $379,150 this year.

There is also some small movement on the estate tax, which his been a moving target for the past few years. The exemption will be raised to $5.12 million next year, up from $5 million. But be warned: At this point, that exemption is scheduled to drop back to $1 million at the end of 2012, unless more legislation is passed.

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