2009: Change You Can Believe In Amid the financial crises and the election-year banter that are currently inundating the airwaves, the approach of the end of the fiscal year makes COLA adjustments fairly calculable. This in turn permits a projection of the numbers that will be of interest to taxpayers in 2009, with one major reservation. The standard deduction increases for joint filers from $10,900 probably to $11,400 (from $8,000 to $8,350 for head of household filers). The additional standard deduction for each taxpayer who is married and either over age 65 or blind rises from $1,050 to $1,100; for those who are unmarried, the additional amount likewise increases by $50 to $1,400. A dependent on another taxpayer’s return may be able to claim $950 as a standard deduction. Personal exemptions will rise from $3,500 to $3,650, and the phaseout level for a joint filer will likely move from $239,950 to $250,200 (to $208,500 for head of household and to $166,800 for unmarried). Such exemptions now are only one-third of the tentative phaseout amount. Thus, every exemption should be at least $2,433 ($3,650 - $1,217) when listed on the 2009 Form 1040. Itemized deductions are reduced when the taxpayer’s AGI exceeds a threshold amount, which apparently will increase to $166,800 from $159,950. Again, the phaseout is only one-third of the amount tentatively computed. The Kiddie tax exemption seems poised to increase from $1,800 to $1,900, with corresponding increase in the range of kiddie qualifying income a parent may elect to include directly on his or her return to $950 to $9,500. A kiddie in 2009 may be able to claim a $6,700 AMT exemption (subject to phaseouts). The AMT remains in a state of flux. As previously reported in this column, Representative Rangel has a proposed “solution” to the annual patches the Congress has devised: repeal. The chances of that happening any time soon appear slim. Even as this is being written, both the Senate and House have passed legislation that will set the AMT exemption amounts at $69,950 for joint filers, $46,200 for head of household filers, and $34,975 for unmarried filers in 2008 only; so the AMT remains murky in 2009, because the much lower unadjusted levels -- $45,000, $33,750, and $22,500 respectively – that will again be apparently applicable in 2009 are subject to the suspicion that they will again be increased but there is no assurance. That legislation for 2008 is not yet finalized, however, because the provisions are contained in larger legislations that contain other differing provisions that will require reconciliation before it can be presented for signature, but one may presume that the 2008 AMT patch will be enacted. The reservation mentioned in the first paragraph is that the tax programs of the candidates -- and more importantly, the economic necessitates of that year -- may change all or certainly parts of the current outlook. One case in point is the preliminary threshold for the highest tax bracket, which probably will be pegged at $372,950 ($186,475 for marrieds filing separately). If the top tax rate changes, as it does under the Obama plan, this number may also be adjusted. The reservation is tepid because the most recent announcements for the campaign suggest that a President Obama would probably allow the 2001 and 2002 tax cuts to merely expire in accordance with their sunset provisions rather than by an accelerated repeal. If this actually occurs, the return to a top 39.6-percent rate, and a return to a 20-percent maximum capital-gains rate will not kick in until 2011. For more information, please see the following course(s): | |
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