The Individual Investor’s Guide to Personal Tax Planning 2011
This year’s tax guide brings both good news and bad news. The good news is that tax rates, deductions and exemptions are mostly unchanged from last year. The bad news is that some key items are uncertain for 2012.
As of press time, Congress has yet to pass legislation extending the payroll tax cut, the deduction for state sales taxes or higher alternative minimum tax exemptions into 2012. Social Security taxes for employees will revert back to 6.2% of salaries in 2012 from the reduced 4.2% rate charged this year. The deduction for state sales taxes is also slated to expire on December 31, 2011. Exemptions for the alternative minimum tax will revert back to pre-2011 levels next year without new legislation.
In this article
- New Feature on AAII.com
- What’s New?
- New Reporting of Capital Gains
- Tax Software, Books and Guides
- Useful Tax Numbers
- Health Savings Accounts
- Investment Strategies: 2012 and Beyond
- Tax Planning Strategies
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Potentially complicating matters more is the Congressional Super Committee. The bipartisan committee had a November 23 deadline for reaching an agreement on how to reduce the U.S. federal deficit. At press time (November 22), the committee has failed to reach a compromise agreement. It is likely that taxes will become a campaign issue, resulting in eventual changes to rates, deductions and exemptions.
This would be the case particularly for 2013. The Bush-era tax cuts are scheduled to expire on December 31, 2012. Though we report in Table 1 what the 2013 tax rates are currently projected to be, these numbers seem likely to change. To put things bluntly, long-range tax planning remains difficult.
Regardless of what changes Congress makes (or does not make) to the tax laws, one thing will be constant—you will still have to pay taxes. Furthermore, even a simplified tax code is still likely to be too complex; hence the need for tax guides. As has been the case in years past, our tax guide provides an overview of the tax rates and deductions likely to impact the majority of AAII members. Since there are many details, loopholes and pitfalls within the tax code, it is impossible for this guide to provide enough details to cover specific tax situations. Thus, if you have questions, please consult a tax professional. It is your tax return, and the IRS will hold you responsible for any errors made on it.
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