A host of tax breaks will slightly increase in the 2012 tax year and tax brackets will widen to keep pace with inflation, the Internal Revenue Service said Thursday.
The tax agency also announced changes in retirement rules linked to cost-of-living adjustments. Among the modifications is that employees who save money through 401(k) plans and some other retirement savings plans will now be allowed to contribute up to $17,000 annually, up from $16,500. The standard deduction which more than two-thirds of taxpayers claim will increase $300 to $11,900 for married couples filing jointly and rise $200 to $8,700 for heads of household, the tax agency said in guidance issued Thursday. Taxpayers that don't claim the standard deduction generally itemize their deductions.
Tax brackets will also edge higher so that rates are properly targeted to taxpayers' income levels. For instance, a married couple would now need to make $70,700 to move from the 15% tax rate to the 25% rate, up from $69,000 in 2011.The IRS is required by law to revise tax provisions each year to stay in line with inflation. The latest revisions will affect taxpayers filing their 2012 returns in spring 2013.
The inflation adjustments will trigger changes to a wide variety of tax provisions expected to affect almost every taxpayer, the IRS said Thursday. The value of each personal and dependent exemption will go up $100 to $3,800. The annual deductible for medical savings accounts will increase slightly, as will the income level at which deductions for interest paid on student loans is phased out.
SOURCE : http://www.chicagotribune.com/business/breaking/chi-irs-boosts-maximum-401k-contribution-to-17000-20111020,0,2522866.story
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