Tax Savings Information Center
We keep track of all the tax law changes so you don't have to. Below are key changes for 2012 federal returns (due April 15, 2013). TaxACT 2012 federal and state products have all the latest forms and tax law changes to help you get your maximum guaranteed refund the fastest way possible!
Start Free ReturnChildren & Dependents
Adoption Credit
Child Tax Credit
Expanded Earned Income Credit
Expanded Child and Dependent Care Credit
- Worth up to $1,000 per eligible child and remains fully refundable for taxpayers with an earned income of over $3,000 for 2012
- Up to $5,891 for families with 3 or more qualifying children for 2012. The actual credit is based on filing status, number of qualifying children, and income level.
- Phased out at $50,270 modified adjusted gross income if married filing jointly with 3 or more qualifying children
- Maximum amount of qualifying expenses is $3,000 per qualifying dependent or $6,000 for 2 or more qualifying dependents
- Credit worth between 20% and 35% of qualifying child care expenses for 2012 for children under the age of 13 (if parents work or attend school)
Vehicles
Green Vehicles
Plug-in Electric Drive Vehicle Credit
- Credit ranging from $2,500 to $7,500 for qualified plug-in electric drive vehicles placed in service during 2012
- Credit phases out when manufacturers sell at least 200,000 vehicles
- Vehicle's battery capacity must be at least 4 kilowatt hours – credit amount increases for each kilowatt hour above 5
Higher Education
American Opportunity Tax Credit (modified HOPE Credit)
Tuition and Fees Deduction
Expanded Student Loan Interest Deduction
Expanded Coverdell Education Savings Accounts
- Maximum credit of $2,500 per student in 2012 (covers 100% of the first $2,000 and 25% of the next $2,000) for tuition, fees and course materials (books) for the first 4 years of post-secondary education in a degree or certificate program
- Up to 40% of the credit is refundable unless student is under age 24 and certain conditions apply
- Phased out at modified adjusted gross income $80,000 - $90,000 ($160,000 - $180,000 if married filing jointly)
- Eligible taxpayer, spouse or dependent enrolled in an eligible postsecondary institution may deduct up to $4,000 paid for tuition and fees in 2012
- Above-the-line deduction, meaning it can be can be claimed by those taking the standard deduction or itemizing
- Annual limit of $2,500 in eligible student loan interest can be deducted on 2012 returns
- Phases out at $60,000 to $75,000 ($125,000 to $155,000 for joint returns)
- Student must have been at least half-time enrolled in a degree program
- Applies to interest paid on loans for tuition, required enrollment fees, books, supplies, equipment, room & board, transportation and other necessary expenses
- Above-the-line deduction, meaning it can be can be claimed by those taking the standard deduction or itemizing
- Annual contribution limit of $2,000 (vs. $500) was extended for 2012
- Also allows tax-exempt distributions for qualified elementary and secondary education expenses
Homeowners
Residential Energy Efficient Property Credit
Deduction for Mortgage Insurance Premiums
Reminder: Repayment of 2008 First-time Homebuyer Credit
- Credit of 30% for expenditures related to larger residential energy improvements (solar hot water property, geothermal heat pumps and wind energy property) placed in service before Dec. 31, 2016
- Limit on credit amount removed for solar electric property
- Credit caps are also eliminated for qualified solar water heating, geothermal pumps, and wind energy property; $500 cap for each half kilowatt of capacity of the qualified fuel cell property
- Mortgage insurance premiums paid on a qualified mortgage can be deducted as mortgage interest for 2012, subject to the taxpayer's adjusted gross income.
Steps to take now
- Review your federal withholding using the IRS withholding calculator. To adjust your withholding, submit Form W-4 to your employer.
- If you used TaxACT to file your 2012 return (due April 15, 2013), sign in and click on the "Next Year" tab to adjust your estimated payments.
- If you claimed the First-Time Homebuyer credit for a home purchased in 2008, you should have started repayment on your 2010 return (that was due April 18, 2011). Repayment will continue on your 2012 return and beyond until the credit is repaid.
- The 2008 credit is like a 15-year interest-free loan, with the amount repaid in 15 equal annual payments as additional tax on your federal return. You have the option of paying more than the annual amount due on Form 5405.
- Review your federal withholding and/or make quarterly estimated tax payments to make up for the repayment amounts
- Exceptions to the repayment rule can be found here.
For more information, visit the following IRS web pages: Homes purchased in 2008 and Tax Topic 611 
Miscellaneous
Payroll Tax Holiday
Standard Deduction Amounts for 2012
Income Phaseouts for Itemized Deductions & Personal Exemptions
State & Local General Sales Tax Deduction
Standard Mileage Rates for 2012
Educator Expense Deduction
Alternative Minimum Tax (AMT) patch
Exclusion for Employer-Provided Educational Assistance
Estate Tax
Lower Capital Gains and Dividend Tax Rates
Steps to take now
- Review your federal withholding using the IRS withholding calculator. To adjust your withholding, submit Form W-4 to your employer.
- Self-employed workers should consider changing estimated tax payments, but be leery of quarterly underpayment. If you used TaxACT to file your 2012 return (due April 15, 2013), sign in and click on the "Next Year" tab to adjust your estimated payments.
- For 2012, the employee and self-employed portion of the FICA-OASDI Social Security taxes are decreased by 2%, so that the tax rate is 4.2% for employees and 10.4% for self-employed.
- Due to the earned income limit of $110,100, the maximum amount a worker can save by year's end is $2,202.
- This essentially replaced the Making Work Pay Credit that expired at the end of 2011. This measure was NOT renewed for 2013.
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Single $5,950
- If 65 or older, $7,400
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Married $11,900
- If 65 or older, $13,050; if both spouses 65 or older, $14,200
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Head of Household $8,700
- If 65 or older, $10,150
- Blind receive $1,150 more ($1,450 if unmarried and no surviving spouse)
- The Tax Relief Act of 2010 extended the absence of income phaseouts for itemized deductions and personal exemptions for 2011 and 2012.
- Personal exemptions are $3,800 for each person claimed on 2012 returns.
- For 2012, taxpayers who itemize can deduct state and local sales tax paid in lieu of state and local income taxes paid.
The following apply to cars, vans, pickups and panel trucks:
| Purpose | |
|---|---|
| Charitable | 14 cents |
| Business | 55.5 cents |
| Medical/Moving | 23 cents |
- Elementary and secondary educators can deduct up to $250 for classroom supplies purchased out of pocket in 2012.
- Above-the-line deduction, meaning it can be claimed by those taking the standard deduction or itemizing
- Qualified expenses include books, supplies, computer equipment, other equipment and supplementary materials that are used in the classroom.
- The AMT patch was permanently extended by the American Taxpayer Relief Act of 2012 so that fewer taxpayers have to pay the tax
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Exemption amounts for 2012:
- Single and head of household $50,600
- Married filing jointly and qualifying widow(er) $78,750
- Married filing separately $39,375
- Up to $5,250 in employer-provided undergraduate and graduate education costs can be excluded from gross income for 2011 and 2012 (previously only applicable to undergraduate education).
- Note: You cannot use tax-free education expenses paid by your employer as the basis for any other deduction or credit.
- The exemption amount increases to $5.12 million and the 35% maximum rate continues for 2012.
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