IRS Releases Official 2010 Tax Rate Brackets, Standard Deductions, Other Inflation-Adjusted Figures

October 22, 2009 -- The IRS has issued the income tax brackets, standard deduction and many other inflation adjustments for the 2010 tax year. Highlights include a higher standard deduction for heads of household but not for single individuals or married couples filing joint returns. Various tax breaks will have minor adjustments for 2010. However, the personal exemption and dependency exemption remain unchanged. The annual gift tax exclusion also remained unchanged. Many of the amounts reflect provisions in the American Recovery and Reinvestment Act of 2009 (2009 Recovery Act).

Standard deduction

The standard deduction for married couples filing a joint return remains unchanged at $11,400 for 2010. The standard deduction for single individuals and married couples filing separate returns is $5,700 for 2010. The standard deduction for heads of household increases by $50 to $8,400 for 2010.

Exemptions

The personal exemption and the dependency exemption are $3,650 for 2009. The personal exemption and the dependency exemption remain unchanged for 2010.

Gift tax

The annual gift tax exclusion remains unchanged at $13,000 for 2010. For 2010, gift splitting allows married couples to give up to $26,000 to a person without making a taxable gift.

Education

The 2009 Recovery Act enhanced and renamed the Hope education credit as the American Opportunity Tax Credit (AOTC). The AOTC is equal to 100 percent of the amount of qualified tuition and related expenses not in excess of $2,000, plus 25 percent of those expenses that exceed $2,000 but do not exceed $4,000. The maximum credit for 2010 is $2,500, which is unchanged from 2009. For tax years beginning in 2010, the AOTC begins to phase out for single individuals whose modified adjusted gross income (MAGI) exceeds $80,000 and at $160,000 for married couples filing joint returns.

For 2010, the $2,500 maximum deduction for interest paid on qualified education loans under Code Sec. 221 begins to phase out for single individuals with MAGI in excess of $60,000 and for married couples filing joint returns with MAGI in excess of $120,000. The deduction is completely phased out for single individuals with MAGI of $75,000 or more and for married couples filing joint returns with MAGI of $150,000 or more.

Children

For 2010, the value used in Code Sec. 24(d)(1)(B)(i) to determine the amount of the child tax credit under Code Sec. 24 that may be refundable is $3,000. The credit for qualified adoption expenses is $12,170 for 2010. The amount used to reduce the net earned income reported on a child’s return subject to the kiddie tax is $950. The same $950 amount is used for purposes of Code Sec. 1(g)(7) to determine if a parent may elect to include a child’s gross income in the parent’s income and to calculate the kiddie tax.

2010 Tax Rate Tables

Married Individuals Filing Joint Returns and Surviving Spouses

If Taxable Income Is:

The Tax Is:

Not over $16,750

10% of the taxable income

Over $16,750 but not over $68,000

$1,675 plus 15% of the excess over $16,750

Over $68,000 but not over $137,300

$9,362.50 plus 25% of the excess over $68,000

Over $137,300 but not over $209,250

$26,687.50 plus 28% of the excess over $137,300

Over $209,250 but not over $373,650

$46,833.50 plus 33% of the excess over $209,250

Over $373,650

$101,085.50 plus 35% of the excess over $373,650

 

Unmarried Individuals (other than Surviving Spouses and Heads of Households)

If Taxable Income Is:

The Tax Is:

Not over $8,375

10% of the taxable income

Over $8,375 but not over $34,000

$837.50 plus 15% of the excess over $8,375

Over $34,000 but not over $82,400

$4,681.25 plus 25% of the excess over $34,000

Over $82,400 but not over $171,850

$16,781.25 plus 28% of the excess over $82,400

Over $171,850 but not over $373,650

$41,827.25 plus 33% of the excess over $171,850

Over $373,650

$108,421.25 plus 35% of the excess over $373,650


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