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What You Need to Know Before Filing Your Taxes

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Knowing how the tax rules are shifting can help you make better decisions throughout the year. While there have been no major changes to taxes since 2010, it pays to be aware of a few new developments. We spoke with Colby Murphy, Financial Advisor and Assistant Vice President at SunTrust Investment Services, about what's new with taxes in 2011 and 2012.

Q: Are there any new tax rules that will affect investors?

A: Investors should be aware of one new rule that will affect how capital gains and losses are reported to the IRS. Until recently, investors were obligated to track and report their investments' cost basis (the original value used to calculate gains or losses) themselves.

Now, due to recent financial legislation, brokerage companies also must report the cost basis of any stocks that were sold in 2011. The rules apply to mutual funds in 2012, and to bonds and stock options in 2013. You need to make sure the cost basis figures you report match those being reported on your behalf.

Q: Are there any changes to tax credits or deductions?

A: Most of the popular tax credits for energy-efficient home improvements expired at the end of 2011—so you can take them for last year's taxes, but not on your 2012 return. These include the credits for adding insulation, and for installing efficient windows, doors, roofs and heating and air conditioning systems. The 30 percent credit for geothermal heat pumps, small wind turbines and solar energy systems remains in place for 2012.

Two deductions also expired at the end of 2011: The $250 deduction for teacher classroom expenses and a deduction that applies to state sales taxes in place of state income tax.

Q: Has the IRS made any changes due to inflation?

A: Yes, there is the usual increase in tax bracket thresholds. Also, standard deductions for married couples filing jointly will increase by $300 in 2012, to $11,900. Deductions for other taxpayers will increase also, but by slightly less. NOTE: Taxpayers have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due, the IRS announced. That's because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16.

Need Help?

Want an idea of how much tax you will owe? Our Federal Income Tax Estimator can help you estimate your tax liability, along with your average and marginal tax rates.

For more help with your retirement needs, you can meet with the retirement specialist in your neighborhood. Just call or stop by the branch to make an appointment. Call 800.511.2276 to learn more.


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