married couples

Tax

Best Filing Status for Married Couples

Summer is wedding season. After you say, “I do” you’ll have two filing status options to choose from when filing your 2012 tax returns: married filing jointly, or married filing separately.

Married Filing Jointly

You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

Joint Responsibility. Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.

Married Filing Separately

If you are married, you can also choose married filing separately as your filing status. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

We Can Help

Give us a call if you’re not sure which status to file under. If you and your spouse each have income, we will figure your tax both ways and let you know which filing status gives you the lowest combined tax.

Tax

Tax Brackets, Deductions, and Exemptions for 2012

In 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

    • The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
    • The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, also up $200. The additional standard deduction for blind people and senior citizens remains unchanged from 2011 at $1,150 for married individuals and $1,450 for singles and heads of household. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
    • Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

We’ll be glad to help with all of your tax planning needs in 2012. Give us a call today!

Financial Planning Retirement

Your Pension Plan – Inflation Adjustments for 2012

For 2012, there are a few cost of living adjustments for pension plans and other retirement-related items. Check out what to expect in the new year….

  • The contribution limit for employees who participate in section 401(k), 403(b), or 457(b) plans, and the federal government’s Thrift Savings Plan, increases to $17,000 in 2012, from $16,500 in prior years.
  • The catch-up contribution limit in those plans for those aged 50 and over remains unchanged, at $5,500.
  • IRA contributions and catch up limits remain unchanged for 2012 at $5,000 and $1,000 respectively.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are active participants in an employer-sponsored retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000-$66,000 in 2011.
  • For married couples filing jointly, in which the spouse who makes the IRA contribution is an active participant in an employer-sponsored retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not an active participant in an employer-sponsored retirement plan and is married to someone who is an active participant, the deduction is phased out if the couple’s income is between $173,000 and $183,000 in 2012, up from $169,000 and $179,000 in 2011.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to 183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is an active participant in an employer-sponsored retirement plan, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.

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Copyright All rights Reserved. Financial Dream Team, like all providers of personal financial services is required by law to inform their clients of their policies regarding privacy of client information. The information in this material is not intended as tax or legal advice. Financial Dream Team, USA, LLC is a registered business in Califronia. Provided content is for informational purposes only.

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