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Taxpayers to catch a break on ’09 returns – or will they?

November 11, 2008 by  

IRS has made inflation adjustments for 2009 tax yearTaxpayers could get a break on their 2009 tax returns due to inflation adjustments recently announced by the IRS.

The adjustments comply with a federal law requiring several dozen parts of the tax code to be annually adjusted for inflation.

Among the provisions are a $150 increase in personal and dependent exemptions and a modest increase in standard deductions for both married and single taxpayers, plus a boost in the maximum earned income tax credit.

There will also be a small increase in tax bracket thresholds between the 15 and 25 percent brackets. The IRS notes that the threshold between those two tax rates will increase from $65,100 to $67,900.

The annual gift exclusion will also be increased by $1,000, up to $13,000.

Still, any gains felt by taxpayers in the spring of 2010 could easily be offset by other factors. For example, wsj.com columnist Tom Herman warns that on top of uncertainty about what will happen on the tax front, "millions of high-income workers will get hit by higher Social Security taxes."

Herman cites data from the Social Security Administration predicting that 11 million out of about 164 million workers will end up paying more when the maximum amount of earnings subject to Social Security tax rises from $102,000 to $106,800.
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