2014 income Tax Brackets Preview

October 24, 2013

In these sensitive days, when every single person in the United States seems to know and have an opinion on the current level of taxes in our country, it’s good news to find that there might actually be some savings ahead for many of us.

Every year, after the Consumer Price Data is released for August, the tax company Wolters Kluwer analyzes the information from the previous 12 months, and calculates how the actual inflation during that time period will affect the upcoming year’s income tax brackets.

In this situation, inflation is actually good, because it raises the amount of the personal exemptions and standard deductions that reduce taxable income, as well as increasing the thresholds where higher taxes become effective.

The Wolters Kluwer figures are just estimates, of course, and the IRS will provide the actual numbers during the 4th Quarter of the year.

Most taxpayers benefit from the indexing of the tax code to inflation, as it permits a greater amount of income to be taxed at lower rates.

Brackets for Married Taxpayers Filing Joint Returns

Tax Rate 2013 2014
10% $0 – 17,850 $0 – 18,150
15% $17,850-72,500 $18,150-73,800
25% $72,500-146,400 $73,800-148,850
25% $146,400-223,050 $148,850-226,850
33% $223,050-398,350 $226,850-405,100
35% $398,350-450,000 $405,100-457,600
39,6% $450,000 and up $457,600 and up

 

Brackets for Single Taxpayers

Tax Rate 2013 2014
10% $0 – 8,925 $0 – 9,075
15% $8,925 – 36,250 $9,075 – 36,900
25% $36,250 – 87,850 $36,900 – 89,350
25% $87,850 – 183,250 $89,350 – 186,350
33% $183,250 – 398,350 $186,350 – 405,100
35% $398,350 – 400,000 $405,100 – 406,750
39,6% $400,000 and up $406,750 and up

 

What this means in concrete terms is that married taxpayers who earn $100,000 per year will pay $145 less in tax year 2014 than in tax year 2013.

The personal exemption and standard deduction numbers will also be indexed to inflation and will increase for tax year 2014.

The standard deduction for married couples filing jointly will increase from $12,200 to $12,400. For single filers it will increase from $6,100 to $6,200.

The personal exemption amount will increase, from $3,900 to $3,950, worth an additional $200 for a family of four.

Other income-tax-related line items that will see inflation indexing including the phaseout levels for personal exemptions, the estate tax thresholds, and, in a huge win for tax reform, the AMT (Alternative Minimum Tax) calculation is now permanently adjusted for inflation, an event which hasn’t occurred in 40 years.

So assuming your income has remained stable from year-to-year, you can expect to see a slight decrease in your overall taxes due thanks to this indexing.

Of course, the official numbers will come from the IRS later this year, but these projections are a good estimate for your tax planning needs.