The holidays are upon us. Everyone is busy cooking, cleaning, shopping, gifting, eating, and celebrating. Don’t forget to also plan for the tax season. It will be here before you know it. 2011 federal tax returns or requests for extensions are due Tuesday, April 17, 2012, because Emancipation Day is on Monday, April 16, 2012.
Over the next few weeks and months, I am going to blog about tax law changes and what you can do to minimize your tax.
Before I delve into the hard stuffs, let’s review the basic tax formula
Adjusted Gross Income (AGI)
<Standard Deduction>or<Itemized Deductions>
Federal Income Tax
Tax Due or Refund
Gross Income: wages, interest, dividend, state tax refunds*, alimony received, business income, capital gain/loss, IRA Income*, pension/annuity, rental income/loss, K-1 income/loss, unemployment compensation, social security benefits*, and other income
<Adjustments>: Educator expenses, IRA*, student loan interest expenses, tuition and fee deduction, health savings account, moving expenses, one-half self employment FICA, moving expenses, self-employed health insurance, self-employed retirement, interest withdrawal penalty, and alimony paid
<Itemized Deductions>: medical expenses in excess of 7.5% of AGI, sales taxes, property taxes, interest expense for home and investment, charity up to 50% of AGI, casualty/theft in excess of 10% of AGI, miscellaneous in excess of 2% of AGI, and other miscellaneous
<Standard Deductions>:You cannot use both itemized deductions and standard deductions. It’s an eithor or situation.
- Single $5,800
- If 65 or older, $7,250
- Married $11,600
- If 65 or older, $12,750; if both spouses 65 or older, $13,900
- Head of Household $8,500
- If 65 or older, $9,950
- Blind receive $1,150 more ($1,450 if unmarried and no surviving spouse)
<Exemptions>: for 2011, personal exemptions are $3,700 for each person. Multiply $3,700 by the summation of this number in parentheses (yourself plus spouse plus dependents)
With this basic understanding of the tax formula for individual taxation, I hope you are armed with enough knowledge to plan your tax future accordingly. Remember, I am a Certified Public Accountant. If you want me to file your tax returns to save you money and time, contact me at FinanceExpressOnline@hotmail.com
*These items require explanations too extensive for this blog.
- 6 Tax Moves to Make Before December 31st (mint.com)