2009 versus 2010 Federal Income Tax Bracket Tables and Standard Deduction Changes

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2010 Federal Income Tax Rate and Brackets and various tax benefits will remain unchanged or change only slightly over 2009 levels as shown in the table below. Consumer Price Index (CPI) data released by the Bureau of Labor Statistics (BLS), used by the IRS in calculating 2010 tax parameters, has been reviewed by many tax experts and organizations with consensus estimates showing that the personal exemption amount, standard deduction, federal income-tax brackets and many other figures will barely change next year, Here are some notable changes reported which are important to factor into your 2010/2011 tax planning and setting of 2010 employer withholdings:

- The personal exemption ($3,650) will remain unchanged for this year, along with the $5,700/$11,400 standard deduction for most taxpayers (except for a $50 increase for heads of household filers). This marks the first time that no increase in these parameters has taken place. Nearly two out of three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions, and state and local taxes.

- Due to low levels of inflation over the last year (0.2%), most workers won’t receive as large an increase in take-home pay in January 2010 as they did last January given the automatic inflation adjustments (assuming pre-tax wages stay the same).

- Various tax bracket thresholds will see minor adjustments. For example, for a married couple filing a joint return the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $68,000, up from $67,900 in 2009.

- The annual gift-tax exclusion of $13,000 also won’t change. This means a person can give away as much as $13,000 each to anyone he or she wishes without any tax considerations. Many wealthy people take advantage of this provision each year as part of their estate-planning strategy. One can give away even more than the exclusion amount by paying someone else’s tuition or medical bills, but must make those payments directly to the medical or educational provider.

Indexing brackets lowers tax bills when there is inflation by including more of one’s income in a lower bracket, such as the 15% rather than the 25% bracket. The lack of change for 2010 creates a level playing field for taxpayers from all brackets, but those with high incomes actually stand to benefit in 2010 because “stealth taxes,” those that don’t involve changing tax rates, are being phased out. Among them are limits on itemized deductions and personal exemption amounts. 

Taxpayer savings from inflation adjustments can vary tremendously, depending on an individual’s circumstances. A married couple filing jointly with total taxable income of $100,000 should pay $12.50 less in income taxes in 2010 than on the same income for 2009, compared with a $312.50 savings between 2008 and 2009. A single filer with taxable income of $50,000 should owe $6.25 less next year due to the adjustments, compared to a $156.25 savings with significantly higher inflation between 2008 and 2009. See a review of the best 2010 Tax Filing Software.

[Update -2011 Income Tax Brackets] President Obama has signed into law a bill that covers an extension of all the bush-era tax cuts, in addition to providing additional tax breaks for all families and small business. With this legislation he has essentially created a new 2011 Economic Stimulus package, estimated at around $858 billion.  See more on this and details on the new payroll and small business tax breaks in this article.  You can also get updated information on the 2011 Federal Income tax brackets and rates, now that this legislation has been passed.

To get updates on other tax changes consider subscribing (free) via Email or RSS to get the latest updates.

Sources: WSJ ,The Tax Foundation

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~ Can’t afford to pay my taxes! What happens if I file late and can I get an extension
~ Updates & Taxes on the 2009-2010 Economic Stimulus Credits and Payments
~ Capital Gains and Losses : Tax Facts and Figures
~ Where to Invest $50,000 – Stocks, Gold or Real Estate

resident Obama has signed into law a bill that covers an extension of all the bush-era tax cuts and additional tax benefits. With this legislation he has essentially created a new 2011 Economic Stimulus package, estimated at around $858 billion.
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{ 12 comments… read them below or add one }

Victor Taxman March 30, 2011 at 10:32 pm

My dad owns a property that is on the Historical Landmark Registry. It was once an income-producing investment. It has not been open for business at any time during 2010, however, he still paid BIGGGG real estate taxes. Since no revenue was generated, can the real estate taxes be deducted. Sch A or Sch C?

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Mike V. March 1, 2011 at 12:33 pm

I found that it is not on Schedule L for this year. Can anyone explain why? Why the change?

Thanks.

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Albert Wallauer February 1, 2011 at 8:12 pm

In 2008 and 2009 when filing using standard deductions you could claim $500/$1000 additional for real estate taxes. What about 2010?

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Martin V January 21, 2011 at 9:46 pm

When will I get my W2 from my employer and has the tax filing deadline expired?

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andys2i January 21, 2011 at 9:48 pm

- Key Dates for 2010-2011 Tax season:

* The IRS begins accepting e-file – January 11, 2011
* W-2’s due to employees (unless IRS exemption provided) – January 31, 2011
* Tax Filing Deadline or request for extension– April 18, 2011

Reply

Vicki January 19, 2011 at 5:08 pm

We bought all new Energy Star windows and New siding for our house — siding and window were ordered and paid for in December but not installed until January. Can we take the $1500 tax credit or do we lose it completely?

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andys2i January 19, 2011 at 5:12 pm

You should still be able to to get it for the purchase.

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Anonymous December 23, 2010 at 10:37 am

Are you seriously kidding me? What makes you think that because you are in a “higher tax bracket” you are any smarter than someone in a lower bracket? What did they teach you in school may I ask? For your information, there are those of us in the “lower tax brackets” with Master’s degrees and Phd’s who do social service work for the service it gives to others not the money in our bank accounts. Maybe next time you decide to make a comment such as this you should use what you think of as a brain and figure it out. I can tell you that there are many people I know who make more money than some of us but are not what you would call smart. Obviously you may be included in that “bracket” of people.

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Anonymous October 4, 2010 at 10:48 am

Can you confirm in simple terms whether the limit on itemized deductions (phase out) is not applicable in 2010? In other words, if gross income is greater than $166,800, I can still claim all my itemized deductions?

Thanks in advance!

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Anonymous November 6, 2010 at 4:28 pm

The limit on itemized deduction is not applicable in 2010 :) You can claim all your itemized deductions

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Anonymous April 16, 2010 at 5:27 pm

>I keep reading that taxes have been cut this year. These charts don't really show that besides a slight change in the brackets. Especially with the standard deduction unchanged, where is the tax cut that I keep reading about?

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Anonymous April 12, 2010 at 1:18 pm

>Anonymous…..no you don't pay federal income taxes if you're in the "lower" tax brackets. Do the math, if you can't one of us in the upper tax bracket can help.

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