As if tax brackets weren't hard enough to figure out, you also have to deal with a huge number of income thresholds that determine whether you're eligible for certain tax benefits. Make too much money, and you'll go over the threshold and find yourself unable to take a valuable deduction or credit.
With dozens of different threshold amounts for various tax provisions, it's impossible to list them all here. But if you're hoping to take advantage of tax-saving opportunities, be sure to look at whether an income threshold applies that could limit your savings.
As we all discovered on New Year's Day, tax laws can be changed retroactively. In the case of federal taxes, lawmakers used their ability to turn back the clock in ways that were beneficial to millions of Americans when they restored tax benefits that would otherwise have gone away.
But residents of California have found out the hard way that retroactive tax law changes can go against you as well. Last November, voters put tax provisions into law that imposed higher tax rates for high-income taxpayers on their entire 2012 income, even though more than 10 months of the year had already passed. Some small-business owners are fighting the retroactive tax, arguing that they were told earlier that they wouldn't have to pay one of the retroactively imposed taxes, but they face an uphill battle.