VOL. 127 | NO. 42 | Thursday, March 1, 2012
Rays of Wisdom
Dana and Ray Brandon
Good News At Tax Time?
Ray’s Take If you haven’t started taking care of your federal income tax filing with the IRS, it’s time to get a move on: April 15th seems to come around awfully quick. But, while you’re hustling to get your paperwork in order, keep in mind that there’s actually some good news for 2012 when it comes to income taxes.
Due to inflation, a number of changes have been made that should help lower the federal income tax bill for most taxpayers in 2012. These include increases in personal and dependent exemptions, an increase in standard deductions and an increase in tax-bracket thresholds. You can find a complete list of the changes at the IRS.gov website, or just ask your tax preparer.
While none of these adjustments is huge, they should make some difference in your tax bill. Plus, there’s one particular change that can give your retirement savings a boost as well as reduce taxes – a $500 increase in the contribution limit for many retirement accounts to $17,000. This applies to 401(k) plans, 403(b) plans, the federal Thrift Savings Plan and some 457 plans.
Even if you don’t save or invest for your future in any other way, this is one avenue you should take advantage of. The money you put in one of these retirement accounts not only defers taxes on those funds, it also is in position to grow over time.
However, don’t expect the good tax news to continue into 2013. A number of short-term tax reductions are set to expire unless extended. While it’s possible some of these might be extended, it’s unlikely they all will.
In particular, you might be looking at an increase in taxes owed for dividends and capital gains. In addition, there’s always the chance of a complete tax overhaul. There’s even been talk of scrapping the current tax code in favor of a value-added tax.
In short, enjoy your tax advantage this year but keep your ears open for changes in the future.
Dana’s Take Paying taxes has aggravated people going back to biblical times and beyond. Whether paid in shells, pelts or food, I’m sure whoever paid that first tax resented it just as much as we do in the Internet age. We want the roads, sewers and services, but we always grieve saying goodbye to a chunk of our earnings.
Make sure you’re taking advantage of one of the best things your blood, sweat and tears have built: America’s national parks.
Great Smoky Mountains National Park is a Tennessee treasure. Visiting Yellowstone National Park was our best family vacation to date. This summer, just like Clark Griswold in National Lampoon’s “Vacation,” Ray and I plan to stand on the edge of the Grand Canyon with our kids. We’re paying to preserve these wonders – might as well enjoy them.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.