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YEAR END TAX PLANNING

According to the IRS there have been over 4,400 changes to the tax code from 2001 to 2010. That means an average of more than 1 change a day. Approximately 579 changes were made in 2010 alone. More changes are coming.

The starting point for tax planning is to know your filing status and to determine your tax bracket. Here are the 2012 tax rates and tax brackets:

Rate. Single. Head of household Married filing joint. Married filing separate

10%. $0—-8700. $0—12,400. $0—17,400. $0—8700

15%. 8701—35,350. 12,401—47,350. 17,401–70,700. 8701–35,350

25%. 35,351–85,650. 47,351–122,300. 70701–142,700. 35,351–71,350

28%. 85,651–178,650. 122,301–198,050. 142,701–217,450. 71,351–108,725

33%. 178,651–388,350. 198,051–388,350. 217,451—388,350. 108,726–194,175

35%. Over 388,350. Over 388,350. Over 388,350. Over 194,175

Keep in mind that you can claim an exemption for yourself, your spouse, and any qualified dependent. In 2012 each exemption reduces your taxable income by $3800.

If you have a child in college be sure they still qualify as your dependent. For example, the child must be younger than 24 at year end, be enrolled as a full time student and not provide more than half of his own support.

Also, be aware that tax rates are expected to go up in 2013. As things stand now, the 10% bracket will be gone…..the lowest rate will be 15%. The top four tax rates will all be increased to 28%, 31%, 36% and 39.6%

MORE increases: not only are income tax rates scheduled to go up but, starting in 2013 a new 3.8% Medicare tax will be levied on taxpayers who have substantial investment income and modified AGI in excess of $250,000 for married filing joint or $200,000 for single filers.