I spent the weekend on the often arduous task of finishing up my 2011 taxes. If you have had the “pleasure” of doing the same, you probably noticed there were a few changes to where certain items were reported on the forms, most especially with regard to capital gains/losses. For those late starters among us, the IRS recently compiled a list of the top 12 changes it thinks you should know about for this year’s tax reporting.
1. Due Date Pushed Out a Couple of Days
The first thing you should know is that taxes are due this year on April 17, not April 15. That’s thanks to April 15 falling on a Sunday and April 16 being the Emancipation Day holiday in Washington, D.C.
2. Gotta Have the Paperwork
New forms are de rigueur this year for capital gains and losses (new Form 8949, Sales and Other Dispositions of Capital Assets) and foreign financial assets (new Form 8938, Statement of Foreign Financial Assets).
3. Expensing Mileage? Know When You Accrued it
You will need to divvy up your mileage for last year based on when you accrued it. For Jan. 1 through June 30, the rate is 51 cents per mile; for the rest of the year it is 55½ cents per mile. For medical and moving mileage the rate is different, of course; Jan.1–June 30, the rate is 19 cents per mile. For the rest of the year it is 23½ cents per mile.
4. Increases to Standard Deduction and Personal Exemption
Standard deductions and exemptions, says the IRS, are both up: the amount of the former depends on filing status for those who do not use Schedule A to itemize deductions, but the latter has been increased $50 to $3,700 for 2011.
5. Moving Things Around
The deduction for self-employed health insurance is no longer allowed on Schedule SE (Form 1040), but is now on line 29 of Form 1040 instead.
6. A Higher Alternative
Those subject to it this year will be happy to know that the AMT exemption amount has increased to $48,450 for singles, or $74,450 if married filing jointly or a qualifying widow(er); $37,225 if married filing separately.
7. A Matter of Health
If you have a health savings account or an Archer MSA, you will need to know that as of 2011, only prescribed drugs or insulin are qualified medical expenses. Also, the additional tax on distributions from HSAs and Archer MSAs that are not used for qualified medical expenses has increased to 20%.
8. Wrangling Roths
Did you convert or roll over money from a traditional IRA to a Roth IRA or designated Roth in 2010? If you did, and you did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.
9. Change to Alternative Motor Vehicle Credit
The alternative motor vehicle credit can only be claimed on a 2011 purchase if the vehicle is a new fuel cell motor vehicle.
10. Home Sweet Home (For Some)Most taxpayers are out of luck for the credit for first-time homebuyers; it expired for 2011. However, some military personnel and members of the intelligence community can still claim the credit in 2011 for qualified purchases.
11. Another Matter of Health
Recent legislation (there’s actually been some?) changed the amount of the health coverage tax credit, which pays qualified health insurance premiums for eligible individuals and their families. Participants who received the 65% tax credit in any month from March to December 2011 may claim an additional 7.5% retroactive credit when they file their 2011 tax return.
12. Make Sure you Send Your Forms to the Right Place
Last but far from least, the IRS would like you to know that the filing location has changed for a number of areas. If you are still relying on snailmail to send in your return, check the instruction book to see where it should go, or go to www.irs.gov.
Additionally, here’s a list of pertinent changes anticipated to occur by the end of the year and into 2013 (barring Congressional action) to be prepared for:
On Their Way Out
Five measures expire at the end of 2012. They are:
1. Payroll Tax Cut of Two Percentage Points
This will go away, resulting in the resumption of the customary 6.2% rate.
2. Top Income Tax Rate of 35%
This will change to 39.6%.
3. Capital Gains Tax Rates
Both the 0% and the 15% brackets will disappear, to be replaced by a single bracket of 20%.
4. Qualified Dividends Tax Rate
This bracket, which taxes qualified dividends at 15%, will disappear entirely and those dividends will be taxed as ordinary income.
5. American Opportunity Education Credit
This, too, will disappear.
Coming Next Year
Here are four tax increases scheduled to take effect in 2013. They are:
1. Net Investment Income Tax
This will be 3.8% for filers making over $200,000 (individuals) or $250,000 (married)
2. Phaseout of Personal Exemption
For a number of years the personal exemption was phased out as your income went up. While the phaseout expired (briefly), it is set to resurrect in 2013.
3. Itemized Deductions Limit
The “Pease” (named after the Congressman who proposed the limit) limit on itemized deductions, will hit those with incomes over $150,000.
4. Flexible Spending Account Limits
These are being cut from $5,000 to $2,500.