Inflation Adjustments Raise 1995 Tax Benefits

WASHINGTON - Taxpayers looking ahead and planning for their 1995 taxes will find larger personal exemptions and standard deductions, plus wider tax brackets that begin at higher income levels. These and certain other tax items are indexed each year so that inflation does not erode benefits or push taxpayers into higher tax brackets. Personal exemptions for 1995 are raised $50 to $2,500.

The standard deduction for married couples will be $6,550, an increase of $200 over 1994. For single taxpayers the standard deduction will be $3,900, an increase of $100. The extra standard deduction for age and blindness remains at $750 for married taxpayers and $950 for singles. The minimum standard deduction for an individual who can be claimed as a dependent on another taxpayer's return will be $650, a $50 increase over 1994.

For married couples, the 15% tax bracket will extend up to taxable income of $39,000, a $1,000 increase. The 28% bracket will extend from taxable income over $39,000 to $94,250, a $2,400 increase. For singles the 15% bracket will rise $600 to $23,350, and the 28% bracket will go up $1,450 to $56,550.

Indexing will expand the earned income credit for 1995. The income limit for the maximum credit is increased to $6,160 for a qualifying individual with one child, $8,640 for a taxpayer with two or more children and $4,100 for a taxpayer with no children.

The income limits designed to phase out the tax benefits of personal exemptions and certain itemized deductions for high income taxpayers will change for 1995. The personal exemption phaseout for 1995 starts for married couples with income above $172,050, up from $167,700 for 1994 and above $114,700 for singles, up from $111,800 for 1994.

The limitation on itemized deductions will affect taxpayers with income over $114,700, up from the 1994 level of $111,800.

Editors Note: Revenue Procedure 94-72 contains the 1995 inflation adjustments and will appear in Internal Revenue Bulletin 1994-50, dated Dec. 12, 1994.

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