Inflation Adjustments Widen Tax Brackets
Washington, D.C. (Oct. 17, 2008)
By WebCPA staff
The Internal Revenue Service said personal exemptions and standard deductions would rise in 2009 to keep pace with inflation, providing more than three dozen tax benefits.
The inflation adjustments will affect 2009 tax returns, which most taxpayers will file in 2010. The value of each personal and dependency exemption is $3,650, up $150 from 2008. The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350).
Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes, the IRS noted.
Tax bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket will be $67,900, up from $65,100 in 2008.
The maximum earned income tax credit for low- and moderate-income workers and working families with two or more children will be $5,028 in tax year 2009, up from $4,824 in 2008. The income limit for the credit for joint return filers with two or more children will be $43,415, up from $41,646. The annual gift exclusion is rising to $13,000, up from $12,000 in 2008.
The official IRS announcement,Rev. Proc. 2008-66, is at http://www.irs.gov/pub/irs-drop/rp-08-66.pdf.