Most taxpayers will catch a break when filing this year in the form of higher personal and dependent exemptions that have been adjusted due to inflation, the Internal Revenue Service said.
The value of each personal and dependent exemption, available to most taxpayers, is now $3,800, up $100 from 2011.
The new standard deduction is $11,900 for married couples filing a joint return, up $300; $5,950 for singles and married individuals filing separately, up $150; and $8,700 for heads of household, up $200.
Nearly two out of three taxpayers opt for the standard deduction, rather than itemizing deductions that often include mortgage interest, charitable contributions, eligible medical expenses, and state and local taxes.
In addition, tax-bracket thresholds have been increased for each filing status. For example, a married couple filing a joint return, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011, the IRS said.
See the full summary of other inflation-based tax benefits from the IRS.
More than 60 million Americans will see a separate financial benefit due in part to inflation. Starting this month, the Social Security Administration has announced that beneficiaries will receive a 3.6 percent cost-of-living adjustment in January. The average retired worker will see a $512 increase in annual benefits — from $14,232 to $14,744 – however some of that amount will be offset by higher Medicare premiums.
The gain comes from a “cost of living adjustment,” or COLA Social Security increase. The increase is suppose to offset a jump in the cost of living based on the Consumer Price index from the third quarter of 2008 through the third quarter of 2011, the Social Security Administration said.