This information is for tax year 2012. For the 2014 standard tax deduction information, click ahead.
The standard tax deduction allowed for Americans is set each year in late October. The standard deduction is indexed for inflation, so it can increase or decrease in a given year depending upon how the cost of living index changes over time.
Standard Deduction 2012
The 2012 standard deduction is the amount that taxpayers will use to file their taxes before April 15, 2013. For taxes to be filed before April 15, 2012, taxpayers need to use the standard deduction 2011 amount set in the fall of 2010.
The amount of the standard deduction for 2012 for taxpayers who are married filing jointly is $11,900. This amount is up $300 from the 2011 standard deduction amount of $11,600. For taxpayers who are filing single, or who are married filing separately, the 2012 standard deduction is $5,950 which is an increase of $150. For those taxpayers who file as head of household, the standard deduction in 2012 is $8,700.
Various other tax credits and income tax deductions are also indexed for inflation. For the 2012 tax year, the maximum earned income tax credit, or EITC, increased to $5,891, which is up form the 2011 maximum of $5,751. Accordingly, the maximum income limit for the EITC increased from $49,078 in 2011 to $50,270 in 2012.
IRS Annual Gift Limit 2012
The IRS permits tax-free gifts to any persons up to a certain limit each year. The annual gift limit is per person, so a couple who is married filing jointly can actually give double the amount of the IRS gift limit each year. Additionally, when giving to a married couple that files jointly, each spouse can receive the full gift amount. For parents looking to give a tax-free annual gift to their married children, that means that a full four times the amount of the limit can be given tax-free.
The 2012 gift limit is $13,000. The annual gift exclusion is unchanged from 2011.
Therefore, a married couple can give $26,000 to a single person, or a full $52,000 to another married couple without triggering gift taxes or any estate tax issues.
Speaking of estate taxes, the 2012 estate tax exclusion is $5,120,00. That is an increase from the estate tax deduction in 2011 of $5 million.
IRS Tax Updates
Although the IRS releases updated tax numbers, deduction amounts and tax credit eligibility throughout the year, the release of widespread numbers like new 2012 tax brackets and other widely claimed tax deductions happens in October of the previous year to allow for official publication of IRS manuals and rules to be completed in time for the start of the tax filing season on January 1st of the following year.
You can subscribe to emails from the IRS or just check the Internal Revenue Service website in late October or early February each year.