2012 tax rates have remained about the same with the only difference to the range of income they apply to. In fact, they are more beneficial to taxpayers this year as each bracket increases – You need to make more money this year to fall into the higher tax bracket.
For income generated in 2012, the tax rates and brackets are as follows:
Based on the above table, how to calculate the tax you owe? Let’s assume you are married, filing jointly, and your overall income was $37,500.
This is your starting point to get you an idea where you fall on the tax spectrum. Before you file tax returns, go over different expenses you had over the year as some of them can be considered as deductions (lower your taxable income) and lower your overall tax obligation. Similarly, don’t neglect the credits you may qualify for as they directly lower your tax liability. All the deductions and credits should have supporting documents, which are often represented by forms.
Some potential deductions to consider are:
- Personal exemption for yourself or dependents; for 2012 that amount is $3,800.
- State and local taxes.
- Home mortgage taxes.
- Student loans interest expense.
- Donations made.
- Medical expenses.
- Contributions to your retirement account.
- Expenses/losses as a result of theft or natural disaster.
For business owners or self-employed individuals:
- Advertising costs.
- Dues and subscriptions.
- Business travel.
- Licenses and permits.
- Office supplies and equipment.
- Marketing and business promotion expenses (website design, etc).
Among some of the tax credits are:
- Earned Income Credit.
- Child credit.
- Lifetime learning credit.
- Installing solar energy panels or other green technology solutions.
- Home improvements.
Government also allows for standard deduction to your taxable income based on your filing status without having to present any supporting documentation. There might be a difference in the amount you can claim as a deduction between standard and itemized deduction. You have a choice to pick the one that benefits you more. Whether itemized or standard, those deductions will further lower the amount of tax you owe.