2012 Tax Law Changes: We've Got You Covered!
Despite what you may be hearing, you will probably not be affected by the 2012 American Taxpayer Relief Act when you file your taxes this year.
According to the White House, 98% of Americans will not see an increase in their 2012 taxes.
But even if you are one of the 2% of taxpayers affected by the fiscal cliff, rest assured that TurboTax accuracy is 100% guaranteed. We work closely with the IRS to ensure that TurboTax is accurate and up-to-date with the latest tax code.
In addition, no taxpayers will be affected by the Health Care Reform Act this year. Those changes don’t kick in until tax year 2013.
Nevertheless, if you have any questions about recent tax law changes, contact one of our experienced tax professionals. Only TurboTax lets you talk to CPAs, EAs and tax attorneys while you prepare your return, free.
American Tax Relief Act of 2012 - Background
On New Year's Day 2013, Congress passed the much-talked about fiscal cliff tax legislation, The American Tax Relief Act of 2012, which was signed by President Obama.
This act includes the permanent patch of the Alternative Minimum Tax (AMT), the permanent reduction of tax rates, and reinstating various tax deductions and credits.
The new law specifically extended certain deductions and credits for the 2012 tax returns. TurboTax is updated with the latest tax changes from the IRS, so you can prepare your 2012 returns today.
What were the 2012 tax law changes?
Generally speaking, the 2012 American Taxpayer Relief Act didn't enact new laws as much as it extended existing deductions and credits that were set to expire at the end of tax year 2011.
The more common tax breaks that were extended beyond 2011 are listed below, if you're interested. TurboTax is already up-to-date with this information, so you can confidently prepare your 2012 returns today.
- Alternative Minimum Tax (AMT): the AMT was permanently patched. With this patch, those lower income taxpayer will not be hit with this higher tax. For a good understanding of what this is all about, check out What is the Alternative Minimum Tax and Do I Have to Pay It?
- Educator expense deduction: Teachers can still deduct up to $250 in classroom expenses for supplies, materials, books and software. This tax break is extended for tax years 2012 and 2013.
- Tuition and fees deduction: College students or parents of students can continue to deduct educational expenses related to schooling (including tuition, books and other supplies) up to $4,000. This deduction is also extended for tax years 2012 and 2013.
- State and local general sales tax deduction: When itemizing their deductions on Schedule A, taxpayers have always been able to deduct their state and local income taxes. With this new law, they can continue to deduct instead their state and local general sales tax through 2013.
- Mortgage insurance premiums: The deduction on Schedule A for mortgage insurance premiums was scheduled to expire December 31, 2011. This deduction was extended for tax years 2012 and 2013.
- Nonbusiness energy property credit: Taxpayers can continue to receive a credit for energy efficient products (such as doors, windows, insulations) that they buy and install in their homes for tax years 2012 and 2013.
- Charitable contributions of IRA distributions: Generally IRA distributions are taxable and contributions to charity are deductible. From 2006 through 2011, taxpayers who were 70 ½ or older could make a distribution of up to $100,000 directly from their IRA to a charitable organization and not pay tax on the distribution. Also they could not deduct the amount contributed to the charity. This type of distribution is now available through tax years 2012 and 2013.
Note: Since this was late in passing, the law is allowing a taxpayer who already took an IRA distribution in December 2012 to contribute that same amount to a charity before February 1, 2013 and count it as this type of distribution as long as other requirements are met. Although not a direct transfer, it will be treated as such.
To read more about the late tax law changes and the impact on when the IRS will open the season for 2013, see IRS Announces January 30 Tax Season Opening.