Important Tax Figure Changes For 2011 and 2012

by Steven Sodini 18. January 2012 10:45
Each year, there are many important changes to various tax amounts, limitations, etc. (see Important Tax Figures for 2012).  This article will highlight some of the major changes from 2010 through 2012. Most of the major changes occurred in the area of tax depreciation.  First, Section 179, which was capped at $500,000 and phased out at $2M of additions, for 2010 and 2011, is scheduled to drop to $139,000 and the phase out is scheduled to drop to $560,000 for 2012, unless Congress decides to retroactively increase these amounts.  Second, Section 179 was expanded to include up to $250,000 of "qualified leasehold improvement" property for 2010 and 2011, but this provision has expired for 2012.  Third, "qualified leasehold improvements" which had a 15-year life for tax depreciation purposes in 2010 and 2011, will now be required to use a 39-year tax life for 2012.  Finally, bonus depreciation, which was allowed for "qualified MACRS property" (generally, tangible property with a useful tax life less than 20 years) up to 50% of the cost basis from 1/1/10 through 9/8/10, was then expanded to 100% of the cost basis from 9/9/10 through 12/31/11, but has now dropped back to 50% (for most assets) for 2012.  Based on the previous tax life change, qualified leasehold improvements would no longer be eligible for bonus depreciation beginning in 2012. The majority of the other common tax figures, such as personal exemptions ($3,800), standard deductions ($11,900 MJ and $5,950 S), etc. have been adjusted slightly each year for inflation.  Others, such as the "kiddie tax" limitations ($1,900), annual gift exclusion ($13,000), etc. have remained unchanged.  Finally, there are still others, such as the estate tax (where the maximum tax rate of 35% remained unchanged from 2010 to 2012, but the federal estate tax exemption fluctuated from unlimited in 2010, to $5M in 2011, and $5.12M in 2012) the employee portion of social security (which decreased from 6.2% in 2010 to 4.2% in 2011 and for the first 2 months of 2012, but was scheduled to go back up to 6.2% for the remainder of 2012), and the residential energy credit (which was limited to $1,500 in total for 2010 and 2011, and is now limited to $500 in total for 2012, which includes amounts already taken in previous years). Please consult the tax professionals at Urish Popeck to assist you with these tax changes for 2011, as well as tax planning for 2012.  
Categories: Tax