>>>News Center >>2012 US Tax Update               


As Bush tax cut expired on December 31, 2012, most taxpayers can still benefit from the lower tax rates, higher deductions in filing of 2012 tax return. Except tax rates, standard deduction, personal exemptions have been adjusted by inflation and a few special deductions and credits expired at the end of 2011, most tax provisions remained unchanged from prior year.

However, it will be a different story for next year's tax filing as the American Taxpayer Relief Act became law on Jan 2, 2013. Mostly affected taxpayers with taxable income above $400,000 (Single) or $450,000 (MFJ), their highest marginal tax rate will be 39.6% instead of current 35%; Long-term capital gain or qualified dividend tax rate will return to 20% from current 15%; Taxpayers with Adjusted Gross Income (AGI) income above $200,000 (Single) or $250,000 (MFJ), Medicare tax surcharge will be charged on top of regular tax, which is 90bps (+0.9%) on the earned income and 3.8% on unearned income in excess of the threshhold. Phase-out of personal exemption and limitation of itemized deduction will be restored for taxpayers with income above $250,000 (Single) or $300,000 (MFJ); There are also a few special credits not available on 2013.

For 2012 tax rate, standard deductions and exemptions, please check out http://1040-cn.com/forms_publications.html.

As a kind reminder, the following is a list of 2012 tax update and items that will affect overseas taxpayers:

1) Filing Form 8938, Foreign Financial Assets Reporting with you income tax return for taxpayers meeting the filing threshhold

For more information and Form 8938 filing instructions, please check the IRS website:
: http://www.irs.gov/pub/irs-pdf/i8938.pdf.

2) 2012 Foreign Earned Income Exclusion and Foreign Housing Exclusion:

Maximum Foreign Earned Income Exclusion (FEIE) has been increased
from $92,900 to $95,100.

Foreign Housing Exclusion (FHE) are different based on your locations:

  • Unexcluded foreign housing expense-base amount is $15,216;
  • 2012 foreign housing expense limit for living in most cities is $28,530.
  • 2012 foreign housing expense limit for living in high-cost localities are higher. A list of Shanghai, Hong Kong and Beijing is set as following:

Location             Daily limit         Expense limit       Maximum Exclusion
                           US$                        US$                          US$
Beijing:               195.07                    71,200                      55,984
Shanghai:          156.17                     57,001                     41,785
Hong Kong:        313.15                   114,300                     99,084

Use Form 2555 to report your foreign earned income and foreign housing exclusion. You can download a blank from the IRS website: http://www.irs.gov/pub/irs-pdf/f2555.pdf, and refer to the filing instructions: http://www.irs.gov/pub/irs-pdf/i2555.pdf.

More updates on 2012 tax filing to be released by the IRS:

Please find out more 2012 US federal income tax update in IRS Publication 17 ( http://www.irs.gov/pub/irs-pdf/p17.pdf ).

More tax guidance for taxpayers living abroad in IRS Publication 54 and IRS website:http://www.irs.gov/faqs/content/0,,id=199953,00.html.


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