IRS UPDATES DOLLAR LIMITS FOR 2012

Brian Wynne, CPA

The IRS has announced many cost-of-living-adjustments for retirement plans, social security tax and some other tax items.

The limits on contributions to retirement plans have been increased for 2012.  Participants can elect to defer up to $17,000 (up from $16,500) into 401(k) plans.  The “catch-up” contributions for participants over age 50 is still the same at $5,500.  The total contribution for defined contribution plans has increased to $50,000 from $49,000, using a compensation base of up to $250,000 (up from $245,000).  IRA and Roth IRA contribution limits have not changed.

The Social Security wage base has been increased to $110,100 from $106,800 for 2012.  The employee’s share (if the tax rate reverts to 6.2%) will be $6,826.20 for 2012.

The standard deduction for 2012 was increased to $5,950 for Single filers and $11,900 for Married-Filing-Joint returns (up from $5,700 and $11,400 respectively).  The personal exemption was inreased to $3,800 from $3,650.

The annual gift exlcusion remains at $13,000, but the estate tax exclusion for decedents dying in 2012 has been inreased to $5,120,000 from $5,000,000.

There were many more changes as well–you can click through to the link to read more or stay tuned for any other important changes!

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