Inflation Adjustments Raise 1996 Tax Benefits

WASHINGTON - Taxpayers looking ahead and planning for their 1996 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 1996 are raised $50 to $2,550.

The standard deduction for married couples will be $6,700, an increase of $150 over 1995. For single taxpayers the standard deduction will be $4,000, an increase of $100. The extra standard deduction for age and blindness increases to $800 for married taxpayers and $1,000 for singles, an increase of $50 each. The minimum standard deduction for an individual who can, be claimed as a dependent on another taxpayer's return will remain at $650.

For married couples, the 15% tax bracket will extend up to taxable income of $40,100, an $1,100 increase. The 28% bracket will extend from taxable income over $40,100 to $96,900, a $2,650 increase. For singles the 15% bracket will rise $650 to $24,000, and the 28% bracket will go up $1,600 to $58,150.

Indexing will expand the earned income credit for 1996. The income limit for the maximum credit is increased to $6,330 for a qualifying individual with one child, $8,890 for a taxpayer with two or more children and $4,220 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 1996. The personal exemption phaseout for 1996 starts for married couples with income above $176,950, up from $172,050 for 1995 and above $117,950 for singles, up from $114,700 for 1995.

The limitation on itemized deductions will affect taxpayers with income over $117,950, up from the 1995 level of $114,700.

(Note: Revenue Procedure 95-53 contains the 1996 inflation adjustments and is attached. It will appear in Internal Revenue Bulletin 1995-52, dated Dec. 26, 1995.)

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