Tax rules change annually due to legislation, court decisions, and cost-of-living adjustments (COLAs) to key tax limits and other items. There are more than three dozen COLAs made annually, based on the Consumer Price Index (CPI) in August. Here is a roundup of some COLAs affecting tax rules for 2012 and some planning strategies that can be used to optimize these changes.
Families
Personal exemptions. The personal and dependency exemption increases to $3,800 in 2012 (up from $3,700 in 2011) (Code Sec. 151). This means a family of four claims a total deduction of $15,200 ($3,800 x 4). There is no phase-out of the deduction for high-income taxpayers in either 2011 or 2012.
