A Summary of 2009 Inflation Adjustments Affecting Individuals

Posted: 27 Oct 2008

See all articles by James C. Young

James C. Young

Northern Illinois University - Department of Accountancy

Date Written: October 27, 2008

Abstract

Without inflation adjustments to key portions of the tax system, individuals would be faced with an erosion of their purchasing power. Beginning in 1985, Congress implemented an indexation procedure to adjust various income tax components, including the tax rate schedules, standard deduction, and personal and dependency exemptions. Although suspended by the Tax Reform Act of 1986, indexation resumed in 1989 and now applies to many items in the tax system.

In this report, Young discusses 2009 inflation adjustments to specific portions of the individual tax system that are tied to a Consumer Price Index year ending in August. Items adjusted by this indexation procedure include the tax rate schedules, standard deductions, exemptions (and related phaseout), the overall limit on itemized deductions, the annual gift tax exclusion, and some computational elements related to the unearned income of minor children, the child credit, the earned income tax credit, adoption expenses, educational savings bonds, education credits, education loan interest, qualified transportation fringe benefits, medical savings accounts (Archer MSAs), health savings accounts, long-term care insurance premiums, long-term care insurance benefits, traditional and Roth IRA income phaseouts and contribution limits, and the section 179 expense election.

Suggested Citation

Young, James C., A Summary of 2009 Inflation Adjustments Affecting Individuals (October 27, 2008). Tax Notes, Vol. 121, No. 4, 2008, Available at SSRN: https://ssrn.com/abstract=1289353

James C. Young (Contact Author)

Northern Illinois University - Department of Accountancy ( email )

College of Business
DeKalb, IL 60115
United States

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