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Wednesday, November 29, 2006

Higher inflation helps reduce taxes

At least from one perspective, the higher inflation has a beneficial effect - it has widen the tax brackets and the income limits for IRAs in 2007. IRS is required by law to make many tax-related adjustments to account for the inflation every year. As a result of these revisions, some of the key changes that have been made are as follows:

- Personal and dependency exemption for most taxpayers increased from $3,300 in 2006 to $3,400

- Standard deduction increased as follows:

$10,700 for married couples filing a joint return, up $400 from 2006
$5,350 for singles and married individuals filing separately, up $200 from 2006
$7,850 for heads of household, up $300

In addition, the tax-bracket thresholds will increase for each filing status, and raise the income limits that apply to the retirement savings contributions credit, contributions to a Roth IRA and deductible contributions to a traditional IRA. For examples, the tax rates for Married Individuals Filing Joint Returns and Surviving Spouses are as follows:

If Taxable Income Is: The Tax Is:

$15,650 or less: 10% of the taxable income
Over 15,650 to $63,700: $1,565 plus 15% of the excess over $15,650
Over $63,700 to $128,500: $8,772.50 plus 25% of the excess over $63,700
Over $128,500 to $195,850 $24,972.50 plus 28% of the excess over $128,500
Over $195,850 to $349,700 $43,830.50 plus 33% of the excess over $195,850
Over $349,700: $94,601 plus 35% of the excess over $349,700

For other brackets and additional information, see the following: IRS publication

posted by Ruby @ 6:57 AM

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