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Inflation (and other) adjustments for 2009 may impact your taxes and planning. A number of cost-of-living adjustments are built into the Tax Code. Other important amounts and thresholds change as a result of schedules introduced in tax legislation.
Here is a brief summary of some of the key number changes that may have an impact on your income tax, retirement and estate planning in 2009.
Changes Affecting Income Taxes:
- After adjustment for inflation, the 2009 standard deduction amounts are as follows (2008 amounts included for comparison):
| 2009 | 2008 | |
|---|---|---|
| Single | $5,700 | $5,450 |
| Married filing jointly and surviving spouse | $11,400 | $10,900 |
- The 2009 personal exemption amount rises to $3,650 (up from $3,500 in 2008).
- Since 1991 a taxpayer's personal exemptions are phased out as his or her adjusted gross income (AGI) exceeds a certain threshold amount. In 2009 the phaseout ranges are as follows:
| 2009 | 2008 | |||
|---|---|---|---|---|
| Phaseout begins when AGI exceeds | Phaseout completed when AGI exceeds | Phaseout began when AGI exceeded | Phaseout completed when AGI exceeded | |
| Single | $159,950 | $282,450 | $159,950 | $282,450 |
| Married filing jointly and surviving spouse | $250,200 | $372,700 | $239,950 | $362,450 |
- Person exemptions are phased out by 2% for each $2,500 by which AGI exceeds threshold.
- The "kiddie tax" rules require that a child's unearned income (dividends and interest, for example) be taxed at the parent’s usually higher rate. Previously, the kiddie tax applied only to a child who was under age 14 and had net unearned income over a certain threshold. and if the parent claimed the child as a dependent. Starting in 2007, the age limit of the kiddie tax was expanded to include those under age 18. (The net income threshold for 2009 is $950.)
- The tax rate schedules for singles and married filing jointly in 2009 are as follows:
Single:
| If taxable income is: | The tax is: |
|---|---|
| Not over $8,350 | 10% of taxable income |
| Over $8,350 but not over $33,950 | $835 plus 15% of the excess over $8,350 |
| Over $33,950 but not over $82,250 | $4,675 plus 25% of the excess over $33,950 |
| Over $82,250 but not over $171,550 | $16,750 plus 28% of the excess over $82,250 |
| Over $171,550 but not over $372,950 | $41,754 plus 33% of the excess over $171,550 |
| Over $372,950 | $108,216 plus 35% of the excess over $372,950 |
Married:
| If taxable income is: | The tax is: |
|---|---|
| Not over $16,700 | 10% of taxable income |
| Over $16,700 but not over $67,900 | $1,670 plus 15% of the excess over $16,700 |
| Over $67,900 but not over $137,050 | $9,350 plus 25% of the excess over $67,900 |
| Over $137,050 but not over $208,850 | $26,638 plus 28% of the excess over $137,050 |
| Over $208,850 but not over $372,950 | $46,742 plus 33% of the excess over $208.850 |
| Over $372,950 | $100,895 plus 35% of the excess over $372,950 |
Changes Affecting Estate Planning:
- The estate tax and generation-skipping transfer tax exemption amounts in 2009 are $3.5 million. The maximum lifetime gift exemption amount remains at $1 million.
- The top gift and estate tax rate is 45%.
- The annual gift tax exclusion is $13,000 for 2009.
