Every year around this time, the good folks over at the Wall Street Journal put together their income tax bracket projections for the next year. Because the personal exemption amount, standard deduction and marginal tax rates are all pegged to inflation, these amounts are all adjusted annually based on current inflation data.
While the IRS hasn’t yet released their official numbers, these numbers serve as a good approximation of how things will look next year. There is, of course, an additional variable in the mix this year: the recent Presidential election. So… Keep in mind that these projections apply to current marginal tax rates, which could be changing in the coming year(s).
2009 Federal Income Tax Brackets
The following graphic gives you the projected tax brackets for married couples filing jointly as well as single filers. As you can see, the numbers increased across the board. In other words, if these numbers hold up, your effective tax rate will drop a bit in 2009 thanks to our good friend, Mr. Inflation.
How much can you expect to save? The numbers vary with the particulars of your situation, but a married couple with a taxable income of $100k can expect to pay $312.50 less in federal income taxes in 2009. Again, this ignores the possibility of any major changes to our tax laws.
Other projected tax changes
In addition to changes in the tax brackets, the following changes are expected as a result of inflationary pressures:
- The standard deduction will increase from $10, 900 to $11, 400 for married couples, and from $5, 450 to $5, 700 for single filers.
- The personal exemption will increase from $3, 500 to $3, 650.
- The gift tax exclusion will increase from $12, 000 to $13, 000.
Oddly enough, it appears that IRA contribution limits will be staying the same even though these numbers are also pegged to inflation. Of course, we’re still waiting on official word from the IRS, so it’s possible that these will end up changing, as well.
As they say, nothing is certain but death and taxes. Regardless of what the income tax brackets look like next year, you should start planning now to minimize your tax hit. Be aware (and take advantage) of the most common income tax deductions as well as those tax deductions that people commonly miss. Adopt tax efficient investment strategies. And be sure to take advantage of perks at work like a flexible spending account (FSA).