May 9, 2011

CCH Predicts Tax Relief from 2015 Inflation Adjustments – Part 3
October 28th, 2014
Riverwoods, Ill. (September 18, 2014) By

AMT Exemptions Indexed
Jones observed that ATRA provided for annual inflation adjustments to the exemptions from the alternative minimum tax. Previously, Congress was required to explicitly increase the amounts by statute every time the so-called “AMT patch” was set to expire.

Before ATRA, Congress relied on one- or two-year AMT patches to account for inflation from the initially set amounts of $33,750 and $45,000, respectively. However, the new law now provides for base exemption amounts of $78,750 for married joint filers and surviving spouses, $50,600 for single taxpayers, and $56,000 for heads of households.

Wolters Kluwer, CCH projects that for 2015, the AMT exemption for married joint filers and surviving spouses will be adjusted upward to $83,400, up from $82,100 for 2014. For unmarried single filers and heads of households, the 2015 exemption will be $53,600, up from $52,800 for 2014. For married single filers, the exemption will increase to $41,700, up from $41,050 in 2014.

Standard Deduction, Personal Exemption Rise
The standard deduction and personal exemption amounts are also subject to indexing. Projections for 2015 indicate that the trend will continue, with increases across the board. The standard deduction for single taxpayers, heads of households and married couples filing jointly will all show increases for 2015, by $100, $150 and $200, respectively.

The standard deduction for joint filers, for example, would rise from $12,400 to $12,600 in 2015. Any increase in the standard deduction, of course, can produce lower taxes by decreasing the taxpayer’s taxable income.

The additional standard deduction for those aged 65 years old and older or who are blind will increase to $1,250 for 2015, up from $1,200 in 2014 for married individuals and surviving spouses, but the $1,550 additional amount for single aged 65 or older or blind filers will remain the same. The personal exemption amount gets bumped up by inflation by $50, to $4,000 in 2015, up from $3,950 in 2014 after having increased $100 between 2012 and 2013.

Taxpayers for many years have had to lose a good portion of the value of personal exemptions and itemized deductions when their incomes rise above certain levels, which have also been adjusted for inflation. Starting in 2010, these “phase outs” disappeared from the Tax Code, but ATRA reintroduced them starting last year for certain higher-income taxpayers. ATRA set forth base amounts for the phase-out ranges, which represented increases from their pre-2010 levels, even before inflation adjustments.

The 2014 phase-out range for personal exemptions under ATRA begins at $309,900 for joint filers and $258,250 for single filers. The phase-out is complete once these levels reach, respectively, $432,400 and $380,750. The same income ranges apply to the phase out of itemized deductions.
For a complete look at how income ranges for each tax bracket are projected to shift next, see the Wolters Kluwer, CCH tables below.

“Kiddie” Deduction, Gift Tax Exemption
In general, inflation adjustments are rounded to the next-lower multiple of $50, so if the adjustment produces an increase of less than $50, no increase is made. The “kiddie” deduction, used on the returns of children claimed as dependents on their parents’ returns, increased only six times in the years 2001 through 2014 because of rounding. It last rose for the 2013 tax year. For 2015 the deduction will increase again, to $1,050.

The Tax Code only allows the gift tax exemption to rise when the inflation adjustment would produce an increase of $1,000 or more. The last increase occurred in 2013, when it rose to $14,000. It remains unchanged for 2015.


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