By Tom Herman
Inflation may not sound like a reason to celebrate. But it will
mean at least some federal income-tax relief for most taxpayers for
2015, two tax experts say.
The law requires annual inflation adjustments on many numbers,
from the standard deduction and personal-exemption amounts to
tax-bracket tables.
Washington hasn't yet announced official numbers for 2015. But
Jim Young, professor of accountancy at Northern Illinois
University, and George Jones of Wolters Kluwer, CCH have calculated
estimates based on recent inflation data. (The numbers will affect
tax returns filed in 2016 for the 2015 tax year).
"Indexing effectively provides an automatic tax cut for most
individuals, without the need for Congress to agree on legislation
each year to make it happen," Mr. Jones said.
How much relief you get depends on your tax situation. A married
couple filing jointly, with taxable income of $100,000, should pay
$125 less income taxes for 2015 than on the same income for 2014
"because of indexing of their tax bracket for 2015," says Wolters
Kluwer, CCH.
A single person with taxable income of $50,000 "should owe
$62.50 less next year due to the adjustments to the income-tax rate
brackets between 2014 and 2015."
"Add to those savings the additional tax savings realized in
most cases by slightly higher 2015 standard-deduction and
personal-exemption amounts, as well as amounts that might be
claimed from an increase in the income ceilings imposed on tax
benefits such as education credits, individual retirement account
contributions and more," CCH said. "Combined, inflation-based tax
savings for the 2015 tax year can become substantial."
Messrs. Young and Jones project the basic standard deduction for
2015 will rise by $200 to $12,600 for a married couple filing
jointly, and by $100 to $6,300 for singles. They project the
personal exemption will rise by $50 to $4,000.