CCH Predicts Tax Relief from 2015 Inflation Adjustments -Part 1 Riverwoods, Ill. (September 18, 2014) By Michael Cohn Taxpayers are expected to receive a modest amount of tax relief in 2015, thanks to the annual inflation adjustments provided under the Tax Code. Wolters Kluwer, CCH released estimated ranges Thursday for each 2015 tax bracket, along with projections for a growing number of inflation-sensitive tax figures, such as the personal exemption and the standard deduction. Bloomberg BNA separately released its own set of estimates Wednesday (see Bloomberg BNA Forecasts 2015 Tax Rates). “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,” said CCH senior federal tax analyst George Jones in a statement. “Most taxpayers benefit from inflation adjustments since the adjustments tend to preserve the value of most, but not all, of the dollar-based benefits under the Tax Code year after year.” When there is inflation, indexing of brackets lowers tax bills by including more of people’s incomes in lower brackets—in the existing 15 percent bracket, for example, rather than the existing 25 percent bracket. The formula used in indexing showed a slightly higher amount of inflation this year over last, representing a change of just under 1.58 percent. Nevertheless, so-called “rounding conventions” required under the Internal Revenue Code keep some tax amounts for 2015 the same as they are for 2014, such as the $14,000 gift tax annual exclusion and the $5,500 limit on IRA contributions, but most 2014 figures will move higher, CCH pointed out. Most taxpayers will experience modest savings generated by indexing of the 2015 individual income tax rate brackets for taxpayers. Because of inflation adjustments, for example, a married couple filing jointly with a total taxable income of $100,000 should pay $125.50 less income taxes in 2015 than they will on the same income for 2014 because of indexing of their tax bracket for 2015. In another example, a single filer 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. Combined, inflation-based tax savings for the 2015 tax year can become substantial. TO BE CONTINUED>>>>>> Contact Custom Tax Services for all of your Bookkeeping/Payroll/Tax needs in Utah, North Carolina or any state.
Posted on: Wed, 24 Sep 2014 22:57:06 +0000