As taxpayers begin collecting their W-2s, 1099s and other tax forms, many are not aware of new provisions benefiting itemized deductions and personal exemptions. Prior to 2010, the value of claiming deductions and exemptions on the tax return diminished (or “phased out”) at higher income levels. For example, see phase-out limits from 2009:
|Filing status||AGI threshold/upper limit|
Reduction is applied once taxpayers income exceeded $166,800
For tax years 2010, 2011, and 2012, these reductions or “phase-outs” are repealed. As a result, taxpayers will be able to take full advantage of their itemized deductions and personal exemptions regardless of their income level. With an uncertain tax environment after 2012, higher-income clients may want to work their tax professional to accelerate deductions for tax years 2011 and 2012 to avoid potential phase-outs in the future.