Few Changes in 2010 Tax Brackets
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The Labor Department released data recently that indicates most tax-related numbers will likely be unchanged for 2010.
NEW YORK -- Several tax-related numbers, including tax brackets and deductions, will remain almost completely unchanged for the 2010 tax year.
Based on data released Wednesday by the Labor Department, the personal exemption amount, standard deduction, federal income-tax brackets and many other figures will barely change for 2010, which will affect returns filed in early 2011, after the annual adjustments required by law.
The result of very low inflation, that stasis is striking, according to James C. Young, a professor of accountancy at Northern Illinois University. For the first time ever, he says, "many components that affect taxpayers are not changing."
One of the only notable changes will be a $50 increase in the standard deduction for heads of household. Everyone else will keep their current deductions of $5,700 for single and married taxpayers filing separately and $11,400 for joint filers.
The 2010 personal exemption will be $3,650, unchanged from 2009.
The annual gift-tax exclusion of $13,000 also won't change. This means a person can give away as much as $13,000 each to anyone he or she wishes without any tax considerations. Many wealthy people take advantage of this provision each year as part of their estate-planning strategy. One can give away even more than the exclusion amount by paying someone else's tuition or medical bills, but must make those payments directly to the medical or educational provider.
Indexing brackets lowers tax bills when there is inflation by including more of one's income in a lower bracket, such as the 15% rather than the 25% bracket.
The lack of change for 2010 creates a level playing field for taxpayers from all brackets, but those with high incomes actually stand to benefit in 2010 because "stealth taxes," those that don't involve changing tax rates, are being phased out. Among them are limits on itemized deductions and personal exemption amounts.
The new inflation-adjusted numbers are unofficial. Three private-sector tax experts prepared them: William E. Massey, senior tax analyst for the tax and accounting business of Thomson Reuters; George Jones, senior federal tax analyst at CCH, a Wolters Kluwer business; and Mr. Young, the Northern Illinois professor.
Taxpayer savings from inflation adjustments can vary tremendously, depending on an individual's circumstances. A married couple filing jointly with total taxable income of $100,000 should pay $12.50 less in income taxes in 2010 than on the same income for 2009, compared with a $312.50 savings between 2008 and 2009, according to CCH. A single filer with taxable income of $50,000 should owe $6.25 less next year due to the adjustments, compared to a $156.25 savings with significantly higher inflation between 2008 and 2009.
Taxpayers with more than $373,650 in taxable income in both 2009 and 2010 will see a maximum savings of $51 for joint filers and $39.75 for single filers, compared to a $1,213 and $913.25 difference, respectively, between 2008 and 2009.
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