2012 Tax Benefits to Increase Due to Inflation
Posted on | October 21, 2011 | No Comments
The IRS has just announced Cost of Living Adjustments to various items for tax year 2012. Of interest to a lot of people should be the increase to 401(k) from $16,500 to $17,000—an increase of $500. I’m still not at the max for this year. Deducting $708.33 a pay check would be way too much for me. I suppose if I got a really big pay raise in the near future I might be able to contribute more. My priority is still to set aside enough income in my 401(k) to maximize the employer match, contribute the full amount to my HSA ($3,050), fund my Roth IRA ($5,000) and then add more to my 401(k). Below are some other adjustments that might be of interest to many readers.
- The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250
- The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
- The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.
- For 2012, contributions to an employee’s SEP-IRA cannot exceed the lesser of: 25% of the employee’s compensation or $50,000.
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