By on Dec 21, 2011 in General Tax, Uncategorized | 0 comments

Many federal tax law dollar limits are subject to periodic inflation adjustments. However, due to low “official” inflation rates, many limitations remained unchanged for three years — an unprecedented stretch of no inflation adjustments. For 2012, however, several cost-of-living adjustments will go into effect. Here is a list of some important tax law limitations/adjustments for 2012, reflecting changes from 2011:

  • Personal exemption — $3,800 per eligible person, up from $3,700.
  • Basic standard deduction — $11,900 (married filing jointly), up from $11,600; $8,700 (head of household), up from $8,500; $5,950 (single and married separate), up from $5,800.
  • Social Security taxable wage base — $110,100, up from $106,800.
  • 401(k), 403(b), and 457 plan elective salary deferrals (annual) — $17,000 (up from $16,500).
  • Roth IRA contribution allowability — phaseout range $173,000 to $183,000 of annual adjusted gross income for married couples filing jointly, up from $169,000 to $179,000; $110,000 to $125,000 for single taxpayers and heads of household, up from $107,000 to $122,000.
  • Defined contribution retirement plan dollar limit on annual additions — $50,000, up from $49,000.
  • Phaseout range for those who make deductible contributions to a

traditional IRA and are covered by a workplace retirement plan:

    • Singles and heads of household — $58,000 to $68,000 of modified adjusted income, up from $56,000 to $66,000;
    • Married couples filing jointly — in which the spouse who makes the IRA contribution is covered by a workplace retirement plan — is $92,000 to $112,000, up from $90,000 to $110,000.

For IRA contributors who are not covered by a workplace retirement plan but are married to someone who is covered, the phaseout range is $173,000 to $183,000, up from $169,000 to $179,000.

  • Defined benefit plan limit on annual benefits — $200,000, up from $195,000.
  • Maximum annual compensation used to determine benefits or contributions — $250,000, up from $245,000.
  • Dollar limit used to define highly compensated employee – $115,000, up from $110,000.
  • Compensation limitation defining key employee/officer to “top heavy” plan purposes – $165,000, up from $160,000.
  • “Nanny” tax threshold — annual payment of $1,800, up from $1,700.
  • The gift-tax, generation-skipping-transfer (GST) tax, and estate-tax exemption amount — $5,120,000, up from $5,000,000.
  • Dollar limitation on property eligible for Section 179 expensing election used in a trade or business — $139,000, up from a previously scheduled $125,000. Limit is reduced dollar for dollar as the cost of eligible property placed in service exceeds $560,000, up from $500,000.


Also, tax bracket thresholds increase for each income-tax filing status and rate. For example, for a married couple filing a joint return, the taxable income threshold separating the 15% bracket from the 25% bracket is $70,700 in 2012, up from $69,000 in 2011.

We Can Help

Please contact us if you have any questions regarding these, or any other, tax law limits for 2012. We can also assist with all of your 2011 tax return preparation needs.