2012

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2012 Taxpayer Relief Act Changes to Alternative Minimum Tax

As you know, the alternative minimum tax (AMT) traps more middle income taxpayers every year. To partially alleviate this tax burden, Congress has been enacting annual “patches” to the AMT to increase exemption amounts. The American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act) provides immediate relief for the AMT by permanently increasing the AMT exemption amounts retroactive to the 2012 tax year. Beginning in 2013, these base AMT exemption amounts will be adjusted annually for inflation.

For 2012, the exemption amounts are increased to $78,750 for married couples filing jointly and surviving spouses, $50,600 for single taxpayers and heads of households, and $39,375 for married individuals filing separately.

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2012 Taxpayer Relief Act Changes to Bonus Depreciation and Code Sec. 179 Expense

Congress has enacted the American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act), which provides significantly increased incentives for business investment in capital and equipment.

The 2012 Taxpayer Relief Act extends the 50-percent first-year bonus depreciation allowance for one year to apply to qualifying property placed in service through 2013 (through 2014 for certain longer-lived and transportation property). The bonus depreciation allowance rate of 50 percent remains unchanged.

Under the extension provisions, a corporation also is permitted to increase the minimum tax credit limitation by the bonus depreciation amount with respect to certain property placed in service after December 31, 2007 and before January 1, 2014 (January 1, 2015 in the case of longer-lived and transportation property).

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Tax-Free IRA Distributions

The American Taxpayer Relief Act of 2012 (2012 Taxpayer Relief Act) extends through 2013 the provision which allows individuals who are at least 70½ by the end of the year to exclude from gross income qualified charitable distributions up to $100,000 from a traditional or Roth IRA that would otherwise be included in income. Married individuals filing a joint return are allowed to exclude a maximum of $200,000 for these distributions ($100,000 per individual IRA owner).

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The Earned Income Credit

The American Taxpayer Relief Act of 2012 (American Taxpayer Relief Act) makes permanent or extends enhancements to the earned income tax credit (EITC) provided by Bush-era and subsequent legislation. These enhancements include a simplified definition of earned income, reform of the relationship test and modification of the tie-breaking rule.

The EITC is a tax credit to help you keep more of what you earned. It is a refundable federal income tax credit for low to moderate income working individuals and families. Congress originally approved the tax credit legislation in 1975 in part to offset the burden of social security taxes and to provide an incentive to work. When EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.

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2012

2012 Taxpayer Relief Act Changes to Alternative Minimum Tax

2012 Taxpayer Relief Act Changes to Bonus Depreciation and Code Sec. 179 Expense

Tax-Free IRA Distributions

The Earned Income Credit

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