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IRS Announces 2012 Mileage Rates

The IRS kicked off the issuance of notices for 2012 with Notice 2012-1 which announced various auto mileage rates for 2012.

The standard mileage rate for transportation or travel expenses will remain at 55.5 on January 1, 2012, the rate which the IRS set for the last half of 2011.

The notice also provides other rates for 2012, including a 14 cents per mile rate for use for a charity and a 23 cent per mile rate that will be invoked for use of an automobile for medical care transportation or for moving expenses.

The portion of the business mileage rate treated as depreciation to reduce the basis of the vehicle is listed as follows:



Rate in Cents per Mile












Tax-saving Strategies: Ten Things You Can Do Right Now

Financially strained retirees struggling to make end’s meet in the current economy received some welcome news on Oct. 19. That’s when the Social Security Administration announced that based on the increase in the Consumer Price Index from the third quarter of 2008 through the third quarter of 2011, monthly Social Security and Supplemental Security Income (SSI) benefits for more than 60 million recipients will increase 3.6 percent; the first cost-of-living increase (COLA) since 2009.1 According to the government agency, increased payments to more than 8 million SSI beneficiaries will begin on December 30, 2011.2

However, the insurance trade group Insured Retirement Institute argues that many Social Security recipients may not see the difference in their new cost-of-living adjustment due to an expected increase in Medicare Part B premiums. They are calling it a “compromised” increase.3 The group goes on to report that about 75 percent of Social Security recipients, who were exempt from Part B premium increases in 2010 and 2011 when a COLA was not offered, will not receive the 2012 cost-of-living increase.4

In addition to the COLA increase, there are some additional fiscal changes planned for 2012:

Tax bracket



Head of Household

10% $0-8,700 $0-17,400 $0-12,400
Beginning of 15% $8,701 $17,410 $12,401
Beginning of 25% $35,351 $70,701 $47,351
Beginning of 28% $85,651 $142,701 $112,301
Beginning of 33% $178,651 $217,451 $198,051
Beginning of 35% $388,351 $388,351 $388,351


Payroll Tax Rate

Another change scheduled to take effect in January 2012 is an increase in the taxable maximum for Social Security. According to the Social Security Administration, the Social Security wage base will increase to $110,000 for 2012. This change is estimated to affect about 10 million high-earning Americans.5 Currently, the government imposes a payroll tax on the first $106,800 of income. Without Congressional intervention, the rate paid by workers next year will return to the standard 6.2% from 4.2%. President Obama reportedly wants to reduce that to 3.1%, while also cutting in half the 6.2% payroll tax paid by employers. Both Republicans and Democrats are questioning the effectiveness of the proposal as well as its impact on Social Security’s finances.6

Retirement Plan Contributions

In addition to the payroll take proposal, tax payers may also get to stash up to $17,000 (a $500 increase) in their 401(k) and other retirement plans, according to the Internal Revenue Service (IRS).7 On top of the 401(k) contribution limit increase, the IRS will change the income limits that determine whether taxpayers can make contributions to Roth IRAs, where taxes are paid in the present year and earnings are tax-free. Next year, the adjusted gross income range will be $173,000 to $183,000 for married couples, up from the current range of $169,000 to $179,000.8 The benefit increases in both programs have risen with inflation so recipients don’t fall behind as prices rise. Inflation has been too low the last two years to trigger an increase.

Speaking of inflation, the debate rages between lawmakers who are calling for altering the way inflation is measured, which they feel is exaggerated. Meanwhile, elderly advocates fight against the call for inflation adjustment, saying that the government’s inflation gauge is underestimating the rate at which prices rise, leaving many Social Security-dependant Americans with diminished COLAs.

Please call our office if you are a Social Security recipient with questions about the planned COLA increase or other topics discussed in this article.