(Adds information on estate tax exemption and other tax benefits starting in first paragraph.)
Oct. 20 (Bloomberg) -- Taxpayers will be able to set aside an extra $500 in 401(k) plans and benefit from an additional $120,000 estate tax exemption in 2012, under cost-of-living adjustments announced by the Internal Revenue Service.
The 401(k) contribution cap will be $17,000 in 2012, up from $16,500 this year. The 401(k) limits also affect contributions to similar accounts, including the 403(b) plans for school employees and nonprofit workers and the Thrift Savings Plan for federal employees.
The estate tax exemption for 2012 will be $5.12 million, up from $5 million this year. The higher threshold is scheduled to expire at the end of 2012, and the $1 million limit under previous law is set to return. The annual exclusion for the gift tax will be $13,000, unchanged from 2011.
The IRS announcement on cost-of-living adjustments for 2012 also affects the standard deduction, the personal exemption, income thresholds for various tax benefits and the size of the tax brackets.
The personal exemption will be $3,800, up from $3,700 this year. The standard deduction for married couples will be $11,900, up from $11,600 for 2011.
Top Tax Bracket
The top income tax bracket of 35 percent will apply to taxable income exceeding $388,350 for married couples and individual filers, up from $379,150 this year.
Inflation adjustments apply to provisions across the tax code. For example, the excise tax on some arrow shafts for archery and hunting will be 46 cents each, up from 45 cents. Also, married couples with modified adjusted gross income exceeding $155,000 will receive no benefit from the tax deduction for student loan interest, up from $150,000 in 2011.
--With assistance from Steven Sloan in Washington. Editors: Jodi Schneider, Ann Hughey.
To contact the reporter on this story: Richard Rubin in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Mark Silva at email@example.com