Source: Wall Street Journal
No matter who wins the White House, most taxpayers can look forward to some relief next year.
Based on inflation data released Tuesday by the Labor Department, the personal exemption amount, standard deduction, federal income-tax brackets and many other tax-related numbers will increase in 2009, thanks to annual adjustments required by law. Once again, high-income taxpayers generally will benefit the most.
For example, several so-called stealth taxes that ensnare millions of upper-income Americans each year will start at higher income levels for 2009, compared with 2008. Among these are limits on itemized deductions and personal exemption amounts. They're known as stealth taxes because they raise your taxes without changing the tax rates and thus can be difficult to detect by voters.
In one of the biggest changes, the annual gift-tax exclusion is likely to increase by $1,000 to $13,000, says James C. Young, a professor of accountancy at Northern Illinois University. Starting in 2009, you will be able to give away as much as $13,000 to anyone you wish -- and to as many people as you wish -- without any tax considerations. Many wealthy people take advantage of this provision each year as part of their estate-planning strategy.
(You can give away even more than the exclusion amount by paying someone else's tuition or medical bills. However, you need to make those payments directly to the medical or educational provider.)
All the new inflation-adjusted numbers, which affect returns for 2009 to be filed in 2010, are unofficial. They were crunched by three private-sector tax experts: George Jones, senior federal tax analyst at CCH, a Wolters Kluwer business; William Massey, senior tax analyst for the tax & accounting business of Thomson Reuters; and Prof. Young.