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2012 Tax Rule Changes: What You Need to Know

Tax changesLike it or not, the rules for filing your taxes change every year. Even experts have to relearn the ropes annually, with law changes, new forms, and other hurdles posing a constant challenge.

With just over a month to go before the filing deadline, here's a gallery of some of the more important changes hitting taxpayers this year. For a more complete list, look at the IRS' summary of tax law changes.

Fool.com contributor Dan Caplinger dealt with plenty of changes on his taxes this year. You can follow him on Twitter here.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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need to know all the changes before I begin to file my taxes ( more categories?)

April 09 2012 at 8:50 PM Report abuse rate up rate down Reply


April 04 2012 at 3:08 AM Report abuse rate up rate down Reply

Next year we won't have to worry about filing taxes. Just give Obama your entire years earnings.

April 04 2012 at 3:08 AM Report abuse rate up rate down Reply
Scott Solheim

That is all determined on the state level. In MN, we don't have taxes on food (except for pop and a few things that aren't necessary), and no taxes on clothing. Public schools? How are they going to exist without taxes?

April 04 2012 at 1:37 AM Report abuse rate up rate down Reply

I along with many others are sick of the never ending changes and addition to the anual Fed and State Taxes. I am self employed and have 2 full time people working for me. When I started my business back in 1976 my Fed and State Tax return consited of 7 pages. The 2010 return of Fed and State consisted of 132 pages. Form 4543, Form 8903, Schedule M, endless 1040 worksheets, Bonus Depreciation Report, there seem to be no end to adding more to it. In 1976 it took me about 2 hours to prepare all my information for the Accountant. Then I paid him 40 dollars to finalize my Taxes - In April 2011 it took me about 12 hours to prepare it for him and then paid 800 dollars to have him finalize and file it. One has to wonder "What is the goal here by the Fed and State Gov?" To crush small business like us?? Well - they are doing a good job of heading in that direction.

March 20 2012 at 5:59 AM Report abuse +1 rate up rate down Reply

If you're laid off and draw unemployment, you're taxed on that. I'll agree, it's income but, I don't understand the concept. It's a small portion of what you were making or what you'd be glad to make if only you had a job. Not only that, in part, it's monies that your employer has contributed to the program he's already been taxed on. His company profits/income and I don't think the taxation for him comes after unemloyment compensation. Isn't that double taxation on the money? I'm totally confused so if anybody can explain the rationallity of it, please do. I totally agree on a flat tax. Everybody taxed at a specific rate, no loopholes.

March 20 2012 at 4:34 AM Report abuse +1 rate up rate down Reply

Hi, I am a In-Home Child Care Provider and I am new at this and would like to know the tax Guide for the Self Employed. I do have an EIN for filing my taxes, Thank you for your time.

March 20 2012 at 3:38 AM Report abuse rate up rate down Reply

There should be no deductions at all. Just a flat 10% tax for everyone. We have the most complicated, convuluted tax code in the world. That way big corporations like Apple would actually bring their off shore money into the States and we would all benefit from the 10% on those billions. Instead, they pay no taxes.

Just get the flat tax. Can you imagine paying taxes on Cash for Keys? Sorry Makeminepine. That is ridiculous.
You just lost your home. I hope life gets better for you.

March 20 2012 at 2:58 AM Report abuse +1 rate up rate down Reply

I still can't understand why yhe government taxes your retirement check. If you set up an IRA, and pull money out during your retirement, they tax that too. Why bother, just spend it all or put it under your mattress.

March 20 2012 at 12:34 AM Report abuse +1 rate up rate down Reply

Im being taxed 1000.00 for a 4000.00 cash for keys check given to me when B of A took my home...I got a 1099 from the realty company.. it dont seem right...that was an incentive check..should it be taxed??

March 20 2012 at 12:29 AM Report abuse rate up rate down Reply
1 reply to makeminepine's comment

You are right, makeminepine, you just lost your home. You should not be taxed on monies that were meant to get you on your feet. The purpose of that money is so you will have enough for the first months rent and a security deposit somewhere.I hope your life gets better. Stay healthy

I vote for the flat tax. 10% for everyone. No deductions. The tax laws are too confusing.

March 20 2012 at 3:04 AM Report abuse rate up rate down Reply