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Tax Year 2012 Tax Law Update

Richard G. Furlong, Jr. Senior Stakeholder Liaison. Tax Year 2012 Tax Law Update. MACE CPE Seminar October 18, 2012. OBJECTIVES. Identify 2012 Income tax law changes Recognize expired tax provisions. Self-Employed Deduction for Medicare Premiums, IRC 162(I).

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Tax Year 2012 Tax Law Update

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  1. Richard G. Furlong, Jr.Senior Stakeholder Liaison Tax Year 2012Tax Law Update MACE CPE Seminar October 18, 2012

  2. OBJECTIVES • Identify 2012 Income tax law changes • Recognize expired tax provisions

  3. Self-Employed Deduction for Medicare Premiums, IRC 162(I) • Constitute medical care coverage • May be deducted for self-employed individual’s spouse, dependent, or child under age 27 • Deduction claimed on Form 1040, line 29 • Self-employed individuals may amend prior year returns to claim qualified Medicare premiumsNote: subject to statue of limitations IRC 162(l) / Notice 2008-1

  4. Traditional IRA Contribution LimitationsIRA Deductions Phase-Out Ranges • More than $92,000 but less than $112,000 for MFJ return or qualifying widow(er) • More than $58,000 but less than $68,000 for single or head of household return • More than $0 but less than $10,000 for MFS return IRC 219(g)

  5. Foreign Account Tax Compliance Act • Who must file Form 8938 • Specified individual • Specified foreign financial asset • Reporting thresholds and due dates • Exceptions to FATCA filing requirements IRC 6038D

  6. Specified Individual • U.S. citizen • U.S. resident alien for any part of tax year • Nonresident alien making election to be treated as resident alien • Nonresident alien who is bona fide resident of American Samoa or Puerto Rico Regulation 1.6038D-1T(a)(2)

  7. Specified Foreign Financial Assets • Financial accounts maintained by foreign financial institutions • Foreign financial investment assets not held in account maintained by a domestic financial institution: • Stock or securities issued by someone other than U.S. person, • Any financial instrument or contract having issue or counterparty other than U.S. person. • Any interest in foreign entity IRC 6038D(b)

  8. Reporting Thresholds Depends on marital status, location and asset value at any time during tax year • Unmarried or MFS and living in US: $50,000 / $75,000 • Married and living in US: $100,000 / $150,000 • Taxpayers living abroad: (S or MFS) $200,000 / $300,000 (MFJ) $400,000 / $600,000 Reg 1.6038D-2T

  9. Joint Interests • MFJ, Report maximum value on single Form 8938 • MFS, both spouses report maximum value on their separate Forms 8938 • Other joint owners, report maximum value of entire asset on Form 8938 regardless of separate interest

  10. AMT Exemption Amount

  11. Non-Refundable Credits & the AMT • Credit for child and dependent care expenses • Credit for elderly or disabled • Mortgage interest credit • Education IRC 26(a)(2)

  12. Section 179 Deduction • Limited to $139,000 of qualified §179 property • Phased out when qualifying property placed in service exceeds $560,000 • Qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property are no longer eligible for §179 expensing IRB 2011-45 RC IRC 179(F)

  13. Bonus Depreciation • Special depreciation allowance decreases from 100% to 50% in 2012 for most qualified property placed in service beginning 1/1/2012 • Special depreciation allowance rate continues at 100% for certain long-production property and noncommercial aircraft • Nonresidential leasehold improvements now have 39-year recovery period IRC 168 (k)(5) & IRC 168 (e)(3)

  14. Expired Tax Provisions • Deduction for mortgage insurance premiums • Deduction for state & local sales taxes instead of state & local income taxes • Tuition and fees deduction • Tax-free distribution from retirement accounts for charitable purposes • 0% capital gains rate for DC Zone assets

  15. Expired Tax Provisions • Adoption credit • Credit for non-business energy property • Plug-in electric vehicle credit • Plug-in conversion credit • Alternative fuel vehicle refueling property credit • Indian employment credit

  16. Expired Tax Provisions • New energy efficient home credit • Energy efficient appliance credit • Employer wage differential for active duty members of uniformed services • Work opportunity credit (except certain veterans) • Deduction of expenses for school teachers

  17. Reminders • First-Time Homebuyer Credit, repayment continues this year • Report ½ of 2010 Roth IRA conversions or rollovers on 2012 Form 1040

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