Tax legislation, effects on 2012

     Most of the fighting about the fiscal cliff was about things that will take effect in 2013, but a large number of items that affect 2012 taxes were finalized as part of the package.  Most of them simply continue measures that were in place for 2011, but would have expired for 2012 if no action had been taken.

     The biggest of these items concerns the Alternative Minimum Tax (AMT).  When this tax was put into place years ago, it was supposed to affect only high-income people.  Inflation was raising everyone's incomes up to the point where more than half of returns filed would be affected by it.  A "patch" was put into place for the last couple of years; the patch temporarily raised the AMT exemption levels sufficiently that it would bypass most people.  The patch was due to expire for 2012, and a lot of people would have gotten whacked.  This new legislation made the "patch" permanent.  Therefore far fewer people will have to worry about AMT for 2012.

     Another big one for businesses has to do with the purchase of machinery and equipment.  For the past few years, huge tax write-offs have been available on such items, as another measure to stimulate the economy.  These write-offs were supposed to be much reduced in 2012 and then expire in 2013.  But they have been extended for at least another year.

     In addition to that, a number of other deductions and credits which had been living on annual extensions for a couple of years have been extended again, and some have been made permanent.  These will be in effect for 2012.  Here are a few of them:
*Refundable child tax credit
*"Marriage penalty" relief
*Student loan interest deduction
*Teacher expenses deduction
*College tuition credits
*Direct donations from IRAs for people 70 1/2 years or older
*Certain renewable energy credits

     And many more.  Consult your tax professional for any that you believe specifically affect you.