IRS Inflation Adjustments

This blog post lists some of the Annual Inflation Adjustments published by the IRS today that are interesting not only  to CPAs and tax attorneys. It may be helpful to understand that the 2012 “tax year” was last year (for taxes filed in 2013). But the 2012 tax season is right now (well, actually between January 30th and April 15th 2013). So, we will not be required to file for tax year 2013 until the 2014 tax season. The terminology gets a little confusing.

Adjustments for Tax Year 2012:

  • standard deduction increased to $6,100 (was $5,950)
  • personal exemption increased to $3,900 (was $3,800)
  • maximum Earned Income Credit amount increased to $6,044 (was $5,891)

Adjustments for Tax Year 2013:

  • new tax rate of 39.6 percent added for individuals whose income exceeds $400,000
  • personal exemption subject to a phase-out that begins with adjusted gross incomes of $150,000
  • the Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 (was $50,600)

Make note of these changes because lawmakers may one day be purging the tax code of all deductions, exemptions, credits, and anything else that resembles tax relief.

The Tax Code Exclusion for the .00039 Percent

White House Press Secretary, Jay Carney, told reporters today that President Obama would support a bill to exempt US olympic athletes from paying income taxes on olympic prize money.  He was referring to a bill introduced by Sen. Marco Rubio (R-FL) last week.

Well, the President believes that we should support efforts, like I think the bill you’re referencing, to ensure that we are doing everything we can to honor and support our Olympic athletes who have volunteered to represent our nation at the Olympic Games. So he supports that bill. If it were to get to his desk, he would support it.

~ Press Secretary Jay Carney

Tax Girl points out that bills like this further complicate the tax code in an era when we should be more interested in simplifying.  It seems this was nothing more than a strategic election-year political statement, as it doesn’t make sense to carve out a tax help exception for such a small segment of society.  How small of a segment?  Well, we sent 529 athletes to the London Games this year.  And as of June 8, 2012, the IRS had received 137,200,000 individual tax returns for the 2012 filing season.  I’m all about increasing tax relief opportunities but, conservatively speaking, (since many return filers are still under extension) we’re talking about .00039 percent of taxpayers benefiting from such an exclusion!