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Your federal taxes Know Tax Code changes for 2011 and 2012 W - by Toby Paone, DSEA UniServ Director Toby.Paone@dsea.org ith 2012 soon upon us, there will be some notable changes in the Internal Revenue Service (IRS) tax code. The table here outlines those changes. The biggest change involves the FICA (Federal Insurance Contributions Act) tax for employ- ees which will be going up from 5.65% to 7.65%. The FICA tax pays for Social Security and Medicare, and since 1990, the employee contri- bution rate has been at 7.65%. However in 2011, the FICA tax rate was temporarily dropped to 5.65% as part of President Obama's stimu- lus effort to help pump more "liq- uid" cash into the economy. The U.S. Congress is most likely going to reject President Obama's Jobs bill which would have continued keeping the FICA rate at 5.65% so the rate will revert back to 7.65% of an employee's paycheck starting in January. Other tax code changes for 2012 • $500 increase in 401(k) and 403(b) contribution limits from $16,500 to $17,000 • Additional "catch up" provisions for retirement contributions remain at $5,500 for those age 50 and above; and • Popular tax deduction for educa- tor out-of-pocket expenses where eligible retained. Educators (those who work at least 900 hours during a school year as a teacher, instruc- tor, counselor, principal or aide) can deduct up to $250 from their adjust- ed gross income for qualified, out- of-pocket expenses used for books and classroom supplies. Save your receipts if you are claiming this tax deduction! Type of Limitation Elective Deferrals (401(k) and 403(b); not including 2011 2012 $16,500 $17,000 adjustments and catch-ups) 457(b)(2) and 457(c)(1) Limits (not including catch-ups$16,500 $17,000 Section 414(v) Catch-Up Deferrals to 401(k), 403(b), $5,500 457(b), or SARSEP Plans Defined Contribution Plans Individual Retirement Accounts ("IRAs"), for individuals 49 and below Individual Retirement Accounts ("IRAs"), for individuals 50 and above Income Subject to Social Security Tax FICA Tax for employers FICA Tax for employees Social Security Tax for employers $49,000 $50,000 $5,000 $6,000 $5,000 $6,000 $106,800 $110,100 7.65% 5.65% 6.2% 7.65% 7.65% 6.2% $5,500 Teaching isn't just a job, it's a calling. Wilmington University Graduate Education Programs Graduate degrees in Education provide you with more career options in specialized areas of education. Wilmington University's NCATE-accredited programs build on your skills as an educator. You'll graduate with the credentials you need to stand out from the competition. Certification options are also available. Master of Education, 1991 Delaware Teacher of the Year, 2011 Classes start every eight weeks. EXCELLENCE STARTS HERE. www.dsea.org 1-877-456-7003 | wilmu.edu/DSEA Nov/Dec 2011 DSEA ACTION! 19 Benefit from WilmU's unsurpassed flexibility, with courses starting every eight weeks in formats that fit your life—including online options. Get started today at wilmu.edu/DSEA GRADUATE EDUCATION PROGRAMS