By Janice Gutman
Special to the Herald

Though taxes seem to be one of the most consistent factors of civilized society, the details of tax law vary from year to year, and savvy taxpayers can benefit from keeping an eye on which of the many changes might affect them.

Paying attention to income tax policy changes for 2011 might help you with this year’s tax return, and looking ahead to upcoming changes can help you plan your financial decisions in 2012. There are few things more frustrating than realizing you missed a great tax credit by one year. One important change in income tax filing began in April 2011 and continues this year — the new filing deadline. April 15 has long been “D Day” for tax returns in the United States, but in 2010 the date coincided with the observance of the Washington, D.C. holiday Emancipation Day.

By federal law, Washington, D.C. holidays affect tax deadlines the same way federal holidays do, so the IRS deadline was extended to April 18. This year, April 15 falls on Sunday and Emancipation Day is observed on Monday, April 16. Therefore the deadline for income tax returns will be April 17, giving taxpayers those precious extra days to complete their paperwork.

There will not be appreciable increases in standard deductions or changes in tax bracket percentages in 2011, but that will change in 2012, as deductions will increase to compensate for inflation.  Income levels will be adjusted upwards, so the 25 percent tax bracket will start at $35,350 rather than $34,501.

Sadly, 2011 sees the end of some tax benefits, such as the residential energy credit, which was reduced last year to a $500 lifetime credit with no more than $200 allowed on exterior windows and skylights. Self-employed business operators also lost the deduction for health insurance payments as a direct reduction in self-employment tax; however, heath insurance can be still be deducted from self-employment income.

Business owners who have purchased new equipment in 2011 can also profit from the Bonus Depreciation, which allows them to depreciate 100 percent of tools and other items in one year rather than spread out over a number of years. This 100 percent Bonus Depreciation will no longer apply in 2012.

2011 was a good year to adopt a child and offset child-rearing costs with a $13,360 Adoption Tax Credit. This 2011 benefit is a refundable credit, meaning that it is paid even if it is more than the taxes due.  Even though this credit ends this year, parents adopting in 2012 can still receive a $12,650 adoption credit. This credit is not refundable, but can be spread out as a tax reduction over five years.

2012 will also be a good year to face the unpleasant prospect of foreclosure.  Those forced to foreclose often receive forgiveness on the debt remaining on their mortgages. Unless the present law is extended, beginning in 2013, this debt relief will be taxable as income.

There are many other large and small changes in taxes and deductions every year, and existing policy can be changed at any time.  Professional tax preparers can help you sort out the confusing tangle of tax law updates, but you can also use the web and computer tax programs to keep abreast of the changes.

It is to your financial advantage to know not only what has changed since last year, but what changes are coming in the future.

— Janice Gutman is a CPA with Janice Gutman Tax Services in Port Gamble.