Summary of Tax Law Changes 2012

Individual income tax rates

No change for 2012

Capital gain and dividend rates

No change for 2012

Estate Tax

The exemption stays at $5 million per person. No changes for 2012. Gifting remains at $13,000 for 2012

Permanent AMT relief

The 2012 “AMT Fix” or exemption is permanently increased to $50,600 for unmarried taxpayers; $78,750 for joint filers; and $39,375 for married personas filling separately, to be indexed for inflation after 2012.

Education

The American Opportunity Tax Credit is extended. It permits eligible taxpayers to claim a credit equal to 100% of the first $2,000 of qualified tuition and related expenses, and 25% of the next $2,000 of qualified tuition and related expenses (for a maximum tax credit of $2,500 for the first four years of post-secondary education)

Deductions

Things which expired at the end of 2011 and are now extended through 2013:

Educator’s expenses ($250 above the line deduction)

Mortgage insurance premiums may qualify as residence interest

The option to deduct state and local general sales taxes

The above-the-line deduction for qualified tuition and related expenses

Tax-free distributions from individual retirement plans for charitable purposes. Because 2012 has already passes, a special rule permits distributions taken in 2012 to be transferred to charities for a limited period in 2013. Another special rule permits certain distributions made in 2013 as being deemed made on December 31, 2012.

Credits

The energy property credit for energy-efficient existing homes is retroactively extended for two years through 2013. There is a 10% credit on the cost of:

1. Qualified energy efficiency improvements

2. Residential energy property expenditires, with a lifetime credit limit of $500 ($200 for windows and skylights)

Business Depreciation provisions

These provisions are retroactively extended by the Act through 2013:

50% federal bonus depreciation

15 year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

The limit for Code Sec 179 property is retroactively set at $500,000, and the treatment of certain real property as Code Section 179 property is extended.

Business tax breaks extended

The following business credits and special rules are also extended”

The research credit is modified and extended for two years through 2013

The new markets tax credit is retroactively extended for two years through 2013

The work opportunity tax credit is retroactively extended for two years through 2013

Exclusion of 100% of gain on certain small business stock acquired before January 1, 2014