SENIORS LOOK AT TAX SAVINGSApr 14th, 2012 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances
Strategies for Seniors
Some changes in federal tax statutes will affect 2012 taxes for senior citizens. This post will offer a summary of the changes and strategies available to you, and then you need to talk with your tax adviser about which ones apply to your unique situation.
First, the personal exemption increases from $3700 to $3800. This applies to dependents as well.
Second, tax bracket thresholds change.
- Married filing jointly: 15% bracket moves up to 25% at $70,700 (2011 threshold was $69,000)
- Single: 15% bracket moves up to 25% at $35,350 (2011 threshold was $34,500)
Third, the standard deduction for married filing jointly increases to $11,900; for singles (and married filing separately) $5950; for heads of households, $8700.
More Changes in Taxes for 2012
For those seniors who have 401(k), 403(b) and 457 pension plans, your maximum allowable contribution to the plan without paying taxes upfront increases to $17,000 in 2012. There aren’t a lot of seniors who make the maximum allowable contribution, but if you do make a contribution, you need to talk with your tax adviser about how much that should be in 2012.
More important for some seniors, the catch-up contribution limit for over 50 is still $5,500. That is the ‘catch-up’ amount you can contribute to your retirement plan after you reach 50.
The federal estate tax exclusion increases from $5m to $5.12m in 2012. This is good news for those seniors with large estates that they want to leave to their heirs. You can still gift up to $13,000 to each of your children without gift taxes being applied.
For those seniors in low to moderate income ranges who are still working, the maximum earned income tax credit increases to $5891 in 2012. This means, depending on family size and other factors, you may earn up to that amount in income tax credits.
For more detailed information on tax changes for 2012, click on this link for the IRS official site.