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The 9 New Tax Rules That Will Affect You Most

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The IRS reports that more than one new provision is added to the tax code every day, but here are the ones that matter most for April 15.

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5. Claims for estate tax refunds: The law allows estates to take tax deductions for costs such as funeral expenses, administrative expenses, claims against the estate, and mortgages. But most of these deductions can be taken only if the fees have been paid within three years after the estate tax return was filed (the filing deadline is 9 months after the decedent's death) or within two years after the tax was paid, whichever comes later. The problem is that, especially with estates caught up in protracted litigation, deductible expenses might not actually be paid until long after those deadlines. Starting in 2012, the IRS has provided a formal (and complex) procedure to deal with this problem. If you're in this situation, the key term is "Schedule PC."

6. More support for electric vehicles: If you bought a plug-in electric motorcycle or motorized trike in 2012, the fiscal cliff deal was kind to you. Congress expanded an existing tax credit worth up to $2,500 or 10 percent of the cost (whichever is smaller) of the purchase of electric cars to also cover that electric scooter or trike you splurged on last year.

7. Less support for adoption: The adoption tax credit lets parents deduct costs they incur as part of the adoption process – things like adoption fees, court costs, attorney fees, and travel expenses to meet with the child. For 2012, the maximum credit went down to $12,650 (from $13,360 in 2011) and converted from a refundable to a nonrefundable credit. (A refundable credit is one in which, if the credit reduces your tax liability to lower than zero, the IRS will refund the difference. With a nonrefundable credit, the IRS doesn't give you a refund; the lowest your taxes can go is zero.)

8. Cuts to the energy-efficiency tax credit: A provision of the 2009 stimulus bill increased tax credits for homeowners who made energy-saving improvements to existing homes, like buying more efficient water heaters, furnaces, or windows. In 2011, the maximum tax credit under the program was $500, but it's now been reduced to $300. There's also a $500 total cap on the credit over the years. In other words, if a taxpayer previously claimed $500 worth of the credit (such as $250 in 2010 and $250 in 2011), he can't claim it at all this year, says Gary DuBoff of Utah-based accounting firm CBIZ MHM.

9. Inflation adjustments: Every year, the IRS makes allowance for inflation – raising personal exemptions and standard deductions, widening tax brackets, raising mileage rates, and others. For 2012, the standard deduction rose $300 for married couples filing jointly to $11,900; by $150 to $5,950 for singles and married individuals filing separately; and by $200 to $8,700 for heads of household. Tax-bracket thresholds also increased for each filing status: For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011. And the agency pegged the mileage rate for 2012 at 55.5 cents a mile, up from 51 cents in the first half of 2011. The IRS reports on these and other adjustment here.

While you're doing your 2012 returns, you should start thinking about 2013, says Stan Rose, senior manager of the tax division at accounting and advisory services firm Baker Newman Noyes. The first quarterly 2013 tax payment for self-employed people and businesses is due on April 15, the same day as the 2012 returns, and next year's rules changes are numerous and significant, he says.

Editor's Note: This article by Steve Yoder originally appeared on The Fiscal Times.

For more from The Fiscal Times:

10 Worst States in the U.S. for Taxes

This Is the Worst Tax Mistake You Can Make


10 Unbelievably Wacky Federal Tax Laws

Follow The Fiscal Times on Twitter @TheFiscalTimes.
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