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2015 inflation adjustments for exemptions, deductions, more!

A lot is going on in the next eight weeks.

The holidays are almost here. Got your turkey yet? Made your Santa wish list?

Meantime, you're also checking out the year-end tax moves you need to make to ensure you pay Uncle Sam the lowest possible 2014 tax bill.

And you need to do some 2015 tax planning. Sorry, but it's true. So this week's By the Numbers figure is 2015 in recognition of the many inflation adjustments that will affect next year's tax bill and tax plans.


Back on Oct. 30, I posted next year's ordinary tax rates and the income that falls into those brackets. These 2015 tax bracket amounts are great for comparison to the 2014 data. This will give you an idea of just how similar or divergent your taxes are likely to be next year.

But you also need to know some other amounts that will affect next year's taxes, such as personal exemptions, standard deductions and Alternative Minimum Tax exclusions.

Like the income tax brackets, these amounts are adjusted annually for inflation. Sometimes it's a lot. Other years the changes are minimal.

For 2015, here are some key figures that will impact your taxes.

Exemptions: Personal exemptions are extremely excellent. These amounts offer a way to reduce adjusted gross income to a lower taxable income amount. Every filer gets to claim the exemption amount for him- or herself, along with the same amount for each qualified dependent.

For 2015, the personal exemption amount increases to $4,000. That's $50 more than the $3,950 exemption amount in 2014.

Remember, however, that if you make a lot of money -- or at least what the tax law considers a lot -- then you could lose some of your exemption amount. This reduction is called (usually only by tax geeks) the personal exemption phaseout, or PEP. You or your tax preparer or tax software will have to do some calculating to determine how much of your exemption amount you lose when your income hits a certain level.

For 2015, those PEP triggers are adjusted gross income of $258,250 for single filers; $284,050 for heads of households; and $309,900 for married couples filing jointly. You'll lose your exemption amount entirely in 2015 if your AGI hits $380,750 and you're single; $406,550 and a head of household; or $432,400 for married couples filing jointly couples.

For comparison purposes, in 2014 PEP phaseouts start at $254,200 for singles; $279,650 for heads of households; and $305,050 for married couples filing jointly. Exemption phaseouts this year end when AGIs hit $376,600 for singles; $402,150 for heads of households; and $427,550 for married couples filing jointly.

Standard deduction: Itemizing gets a lot of attention because it's more involved.

But most taxpayers don't mess with Schedule A. They claim the standard deductions amount, which are slightly different for the various filing statuses.

The standard deduction amounts usually are printed directly on Form 1040 or 1040A. (On 1040EZ, the standard deduction amount is combined with the personal exemption amount and noted on that form.)

But you don't have to wait for the forms! The table below shows the 2015 standard deduction amounts, along with what the figures are for 2014.

  Filing Status

Standard Deduction Amount

Standard Deduction Amount




  Head of Household



  Married Filing Jointly



  Married Filing Separately



  Surviving Spouse



Itemized deduction reductions: If, however, you are in the minority that does itemize, in addition to paying attention to all those deductions, you also need to know about the possibility of losing some of them.

As with PEP, itemized deductions are incrementally reduced for wealthier taxpayers. As with other laws named after individuals, this reduction is known as the Pease limitation, again mostly by tax geeks, in honor of the late Rep. Donald Pease (D-Ohio), who championed the law way back in 1990.

The Pease itemized deduction limits kick in and disappear at the same levels as for PEP. However, unlink the exemption amount which could be zeroed out, you'll get at least some of your itemized deductions even if you make a lot of money.

Alternative Minimum Tax (AMT): This dreaded parallel tax system was devised to ensure that wealthier taxpayers paid at least, as the name says, a minimum amount of tax. Under the American Taxpayer Relief Act of 2012, aka the fiscal cliff tax bill, the exemption amounts that protect taxpayers from the AMT were made permanent and indexed for inflations.

For 2015, the AMT exemption amount is $53,600 for single filers; $41,700 for heads of households; and $83,400, for married couples filing jointly.

For comparison, the 2014 AMT exemption amount are $52,800 for singles; $41,050 for heads of households; and $82,100 for married couples filing jointly.

Estate tax: And then there's the meeting of death and taxes.

Estates of individuals who die in 2015 will not be subject to the federal estate tax if the estate's value is $5.43 million or less. That's up from a total asset value of $5.34 for estates of 2014 decedents.

Some folks like to reduce their estate's taxable value by giving some of the money away while they're around to hear the thank yous from recipients. For 2015, the annual exclusion for gifts remains as the 2014 level: $14,000 per gift to any person, related or not, that you wish.

If you don't have a lot of family or friends, I'm always available to help you out here. Just drop me a line!

You also might find these items of interest:


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