As the economy continues on its wild ride, the IRS has announced a series of adjustments for tax brackets and other provisions for the 2009 tax year. These adjustments, in response to inflation, are required by law.
Note that these adjustments will affect your 2009 tax return, normally filed in early 2010. Your 2008 tax return (filed in 2009) is not affected.
Here are a few key tax provisions which have been adjusted for inflation:
Personal and Dependency Exemptions. Personal exemptions and those available for dependents will increase $150 to $3,650.
Standard Deductions. The standard deduction for married couples filing jointly will increase by $500 to $11,400. The standard deduction for singles and married couples filing separately will increase by $250 to $5,700. The standard deduction for head of household will increase by $350 to $8,350.
Kiddie Tax Threshold. The threshold for the kiddie tax will increase by $50 to $950.
Tax-bracket thresholds. Tax-bracket thresholds will increase for each filing status. I’ll post the new tax tables as soon as I can.
Earned income tax credit (EITC). The maximum EITC for families with two or more children will increase by $204 to $5,028. The income threshold in order to qualify will also rise: for joint return filers with two or more children, the threshold will be $43,415.
Gift Tax. The annual gift exclusion will rise by $1,000 to $13,000.
401(k) Contribution Limit. The 401(k) contribution will rise by $1,000 to $16,500.
It’s worth noting that there are some other adjustments, including those for retirement plans/contributions. Keep watching for specific information.
