Inflation Adjustments Widen Tax Brackets
Summary
Inflation Adjustments Widen Tax Brackets Personal exemptions and standard deductions will rise, tax brackets will widen and individuals will be able to make larger tax-free gifts in 2006, thanks to inflation adjustments announced by the Internal Revenue Service.
Personal exemptions and standard deductions will rise, tax brackets will widen and individuals will be able to make larger tax-free gifts in 2006, thanks to inflation adjustments announced by the Internal Revenue Service.
By law, a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being modified for 2006. Key changes affecting 2006 returns, filed by most taxpayers in early 2007, include the following:
- The value of each personal and dependency exemption, available to most taxpayers, will be $3,300, up $100 from 2005.
- The new standard deduction will be $10,300 for married couples filing a joint return, $5,150 for singles and $7,550 for heads of household. 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.