2009 Inflation Adjustments Expand Tax Brackets and Benefits
Wed Nov 19, 2008, 10:14 am | Leave Comment
If you are working and your employer offers health benefits including flexible health benefits account where a certain amount is deducted before taxes like 401(k), it is time to recalculate your estimated tax return. If you have to do some adjustments, now may be a good time.
For 2009, personal exemptions and standard deductions will rise and tax brackets will widen because of inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being adjusted for 2009.
Key changes affecting 2009 returns, filed by most taxpayers in early 2010, include the following:
- The value of each personal and dependency exemption, available to most taxpayers, 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)
- $8,350 for heads of household (up $350).
Nearly two out of three taxpayers take the standard deduction. Itemizing deductions include mortgage interest, charitable contributions and state and local taxes, etc.
- Tax-bracket thresholds 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 is $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 is $5,028, up from $4,824.
- The income limit for the credit for joint return filers with two or more children is $43,415, up from $41,646.
- The annual gift exclusion rises to $13,000, up from $12,000 in 2008.
The tax information contained herein
- is general in nature
- is provided for informational purposes only
- should not be construed as legal or tax advice
As always, if you want to be on a path of financial success:
- To invest, find a good financial adviser.
- To be debt-free, find a good credit counselor.
