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IRS Calculates 2011 Tax Benefits

by Mike Godfrey, Tax-News.com, Washington

27 December 2010


The United States’ Internal Revenue Service has announced that, in 2011, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.

These inflation adjustments relate to eight tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on December 17 this year.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. Most of the new dollar amounts, including retirement-plan-related adjustments, were announced in October. To avoid confusion, the eight provisions released today were not included in the October announcements, due to the anticipated impact of the above legislation.

The new values of the provisions, affecting 2011 returns that are filed by most taxpayers in early 2012, include a USD50 rise in each personal and dependent exemption, available to most taxpayers, to USD3,700; and a USD200 increase in the standard deduction for married couples filing a joint return to USD11,600.

In addition, the new standard deduction in 2011 will be USD5,800 for singles and married individuals filing separately, up USD100, and USD8,500 for heads of household, also up USD100. The additional standard deduction for blind people and senior citizens is USD1,150 for married individuals, up USD50, and USD1,450 for singles and heads of household, also up USD50.

It was said that nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

Tax-bracket thresholds also increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15% bracket from the 25% bracket is USD69,000, up from USD68,000 in 2010.

The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to USD5,751, up from USD5,666 in 2010. The maximum income limit for the EITC rises to USD49,078, up from USD48,362 in 2010.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is USD102,000 for joint filers, up from USD100,000, and USD51,000 for singles and heads of household, up from USD50,000.

However, several tax benefits are unchanged in 2011. For example, the monthly limit on the value of qualified transportation benefits (parking, transit passes, etc.) provided by an employer to its employees, remains at USD230.

TAGS: individuals | tax | law | tax thresholds | tax credits | legislation | United States | individual income tax

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