And Don't Forget To Include:
- Medical expenses you paid for your parents if you provide more than half their support (and certain other requirements are met).
- The cost of a weight-loss program you attend under a doctor's orders to lose weight because of obesity or for other health reasons.
- Premiums paid for qualified longterm care insurance. Within limits, these premiums are deductible as medical expenses.
- Unreimbursed expenses paid for qualified long-term care services. These expenses are also deductible as medical expenses.
Bunching medical expenses, if you can, may be particularly valuable in 2012. In 2013, the AGI threshold for claiming these expenses is scheduled to increase to 10% for taxpayers under age 65. So you may have a better chance of being able to claim the deduction this year. Note, however, that medical expenses are another of the few deductions that are not subject to the limitation on itemized deductions for higher Income taxpayers that's scheduled to be reinstated in 2013.
Remember To Claim Deduction Carryovers
You may carry over to future tax years the unused portion of many deductions that are subject to limits. If you have any carryovers from earlier years of charitable contributions, home office expenses, investment interest and so on, try to use them in 2012.
Tax And Credits
Double-check your estimates
The IRS can assess underpayment penalties if you don't pay enough income taxes during the year through payroll withholding andlor quarterly installments of estimated tax. As part of your planning, you'll want to see if your tax payments are on track. In general, you should aim to pay at least (1) 90% of your projected 2012 tax or (2) 100% of your 2011 tax. However, the required percentage of your 2011 tax is 110% instead of 100% if your 2011 AGI was more than $150,000 ($75,000 if you're a married taxpayer filing separately).
As an employee, your best option for avoiding a tax penalty if you find you're behind on tax payments may be to have your employer withhold more tax from your pay for the rest of the year.
Beware Of The Alternative Minimum Tax
In late 2010, Congress came through once again with an AMT "patch" that retained higher AMT exemption amounts through 2011. However, unless Congress acts again, more people may be subject to AMT in 2012, as AMT exemptions are scheduled to drop to much lower amounts. (See the table for a comparison.) If your AMT is higher than your regular tax, you pay the additional amount on top of your regular tax. The AMT rates are 26% and 28%.
Basically, the AMT system is designed to ensure that taxpayers pay a minimum amount of tax when they use certain tax breaks to reduce their regular tax liability. The AMT calculation is complex. For planning purposes, it may be helpful to identify some of the items that can trigger AMT:
- A higher-than-average number of dependency exemptions
- A large deduction for state income taxes
- The exercise of incentive stock options
- Interest from certain "private activity" municipal bonds
- A large capital gain
|Married filing Jointly||$45,000.00||$74,450.00|
|Married filing Seperately||$22,500.00||$37,225.00|
Offset Tax With Child-Related Credits
While deductions and exemptions lower taxable income, credits actually offset income tax, dollar for dollar. In 2012, you can claim a child tax credit of $1,000 for each qualifying child who is under age 17 on December 31. This credit begins to be phased out with modified AGI in excess of $110,000 for married taxpayers filing joint returns, $75,000 for unmarried taxpayers, and $55,000 for married taxpayers filing