As you prepare your 2011 tax returns, be sure to educate yourself on the possible changes in the tax code this year. Two new credits have been increased. Do they apply to you?
Did you Experience any Significant Life Changes in 2011?
If you experienced a major life change in 2011, such as the birth of a child, the adoption of a child, a marriage or a death, the manner in which you file this year’s return will be slightly different than last year’s. Plus, changes in available tax credits may mean that you will receive increased deductions, ultimately saving you money. That is- if you know what the exemptions are and how to leverage them for your benefit.
If you adopted a child in 2011, you will be thrilled to note that the adoption credit has been increased for 2011 to $13,360 per child. The income limit for the adoption credit is based on your modified adjusted gross income (MAGI), currently set at $185,210 for 2011. If your MAGI exceeds this amount, the amount of your credit will begin to phase out.
Does the AMT Apply to You?
AMT, or alternative minimum tax, applies to those individuals or families with incomes that exceed a pre-defined threshold level. Each year, filers must pay the greater of their regular tax or alternative minimum tax. There is good news for 2011 filers! The AMT tax exemption has been increased for 2011 to $48,450 for single filers, and $74,450 for those married filing jointly.
Life changes and alternative minimum taxes are just two examples of how changes in the 2011 tax law may impact your return’s bottom line. Be sure to consult with a tax professional to determine which credits you are eligible to take advantage of on your 2011 federal tax return.
Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.