Inflation Adjustments Increase Tax Exemptions and Lower Rates (Slightly)

The IRS has announced the annual inflation adjustments for 43 different tax provisions including the rate thresholds for the tax rate schedules. These go into effect on Jan 1, 2015.

Here are some of the adjustments:

• The top federal tax rate of 39.6 percent affects single taxpayers whose income exceeds $413,200 ($464,850 for marrieds), up from $406,750 and $457,600, respectively. 
• The standard deduction rises to $6,300 for singles and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively. The standard deduction for heads of household rises to $9,250, up from $9,100.
• The income threshhold where itemized deductions begin to be phased out begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
• The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. The exemption phase-out begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly) and phases out completely at $380,750 ($432,400 for marrieds).
• The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014.
• The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
• This amount of the basic exclusion (exemption) from federal estate taxes for decedents who die during 2015 is $5,430,000, up from a total of $5,340,000.
• The annual exclusion for gifts remains at $14,000 for 2015.
• For 2015, the foreign earned income exclusion is $100,800, up from $99,200 for 2014.

Here's one I hadn't previously imagined. The tax on arrow shafts for 2015 (to be paid by the manufacturer or importer of certain arrows) is going up to $0.49 per shaft. To avoid this tax, it looks like you want your arrows to be less than 18 inches long and less than 5/16 of an inch in diameter, unless of course your arrows are suitable for use with a bow having a peak draw weight of 30 pounds or more, in which case all your arrow shafts are taxable.

Complete details can be found in Rev. Proc. 2014-61.

- Mark S Gleason CPA
  www.lakes-cpa.com