The internal Revenue Service just issued an announcement regarding their annual inflation adjustments for 2015. This announcement affects many tax provisions but specifically the tax rate schedules and deductions. The adjustments that affect most people are as follows:
1. The tax rate of 39.6% now affects single filers whose income exceeds $413,200 ($464,850 for married couples filing joint returns). This is an increase of about 1%. The other marginal rates (10,15,25,28,33 and 35%) have all been adjusted up, the specifics are in Revenue Procedure 2014-61.
2. The standard deduction rises from $6,200 for a single person to $6,300. Likewise the standard deduction for married couples in 2014 was $12,400 and it is now increased to $12,600. Finally the standard deduction for head of household rises from $9,100 to $9,250.
3. Personal exemptions have also been increased for 2015. The 2014 exemption was $3,950 it has been increased to an even $4,000. However, keep in mind the exemption is phased out beginning with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). This exemption phases out completely at $380,750 for single filers and $432,400 for married couples filing jointly.