Since the late 1980’s the tax code has required adjustments for inflation for Federal income tax brackets. It also requires cost of living adjustments for more than 50 different tax provisions.
Here are some of the changes which will apply to your 2012 tax bill (returns due April 15, 2013):
1. The tax bracket thresholds will rise. In other words more of your income will be taxed at the 15% bracket rather than the 25% bracket. For example, a married couple filing jointly begins paying 25% of their taxes at $69,000 in income for 2011. In 2012 the threshold jumps up to $70,700. If you’re filing as “single” the 25% bracket jumps from $34,500 in 2011 up to $35,350 in 2012.
2. The personal independent exemption which is currently $3,700 will increase to $3,800.
3. Standard deduction for married, filing jointly, will increase in 2012 to $11,900. This is a $300 increase over 2011.
4. For couples filing separately and single individuals the deduction will rise $150 to $5,950.
5. If you’re filing as head of household it will jump $200 up to $8,700.
6. The estate tax exclusion will rise from $5 million to $5.12 million.
7. The annual gift tax exclusion of $13,000 per year, per person will remain the same.