Tax changes for ’01: Tax brackets, personal exemptions, and standard deductions.

The Kiplinger Tax Letter January 5, 2001 The new year brings in a new set of tax brackets for individuals:

Personal exemptions are $2,900 each for you, spouse, dependents.

However, the exemptions phase out gradually as your income rises. They are cut by 2% for each $2,500 of adjusted gross income above $199,450 for joint returns, $132,950 for singles, $166,200 for heads of household. Disappear completely above $321,950, $255,450 and $288,700, respectively. 2012taxbracketsnow.com 2012 tax brackets

Folks in the phaseout zones face higher marginal income tax rates. Effect is to add 0.85% per exemption for taxpayers in the 36% tax bracket. Filers in the 39.6% bracket effectively pay an extra 0.94% per exemption. Adds 4.7% to the effective marginal rate for a top-bracket family of five.

Standard deductions are going up again this year for taxpayers.

For marrieds, $7,600…$8,500 if one is 65, $9,400 if both are.

Singles, $4,550…$5,650 if 65. Household heads, $6,650…$7,750.

For those listed as dependents on another’s 1040, such as a child or ill parent…standard deduction is $750 for investment income, up $50. With earned income, a dependent’s standard deduction is the larger of $750 or earned income plus $250…with a maximum limitation of $4,550 for ’01. see here 2012 tax brackets

Kids under 14 can have investment income of up to $1,500 this year before unearned income is taxed at the parents’ rate. Was $1,400 for ’00.

The cutback in itemized deductions starts at a higher income level in ’01…decreased by 3% of AGI over $132,950, whether married or single.

Examples: If your AGI is $150,000 this year, itemized deductions are lowered by $512…3% of $17,050. At $200,000, $2,012 is chopped off. This raises your effective marginal income tax rate by as much as 1.19%. Reduction doesn’t apply to medicals, casualty losses, investment interest.