Personal exemptions and standard deductions will rise, tax brackets will widen and income limits for individual retirement accounts will increase in 2007, due to inflation adjustments announced by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three-dozen tax benefits will be adjusted for 2007. Key changes affecting 2007 returns, filed by most taxpayers in early 2008, include the following:
- The value of each personal and dependency exemption, available to most taxpayers, will be $3,400, up $100 from 2006.
- The new standard deduction will be $10,700 for married couples filing a joint return (up $400), $5,350 for singles and married individuals filing separately (up $200) and $7,850 for heads of household (up $300). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions.
- Tax-bracket thresholds will increase for each filing status. For example, a married couple filing a joint return will have a taxable-income threshold -- the line separating the 15-percent bracket, from the 25-percent bracket -- set at $63,700, up from $61,300 last year.
Additionally, for the first time, inflation adjustments will raise the income limits that apply to the retirement savings contributions credit, contributions to a Roth IRA and deductible contributions to a traditional IRA when the taxpayer or the taxpayer’s spouse is covered by a retirement plan at work. A complete rundown of inflation adjustments is available at www.irs.gov/pub/irs-drop/rp-06-53.pdf.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access