IRS Publishes Official Tax Rates, Standard Deduction And Other Key Inflation-Adjusted Amounts

Updated 1/11/12

Overpayment and underpayment interest rates

For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3%. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3% and the overpayment rate is the federal short-term rate plus 2%. The rate for large corporate underpayments is the federal short-term rate plus 5%. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point (0.5%).

Interest rates for the calendar quarter beginning July 1, 2010, will remain the same. The rates will be:

  • 3% for overpayments [2% in the case of a corporation];
  • 3% for underpayments;
  • 5% for large corporate underpayments; and
  • 0.5% for the portion of a corporate overpayment exceeding $10,000.

IR-2011-112, Nov. 28, 2011 1/11/12

Standard auto expense mileage rate (cents per mile)

IR-2011-116, Dec. 9, 2011. The 2012 standard mileage reimbursement rate will be 55.5¢ per mile for business miles driven, 23¢ per mile driven for medical or moving purposes, and 14¢ per mile driven in service of charitable organizations 1/11/12

IR-2010-119, Dec. 3, 2010. The 2011 standard mileage reimbursement rate will be 51¢ per mile, the medical and moving expenses rate will be 19¢ per mile, and the charitable deduction rate remains at 14¢ per mile. 12/10/10

IR-2009-111, Rev. Proc. 2009-54. The 2010 standard mileage reimbursement rate will be 50¢ per mile, the medical and moving expenses rate will be 16.5¢ per mile, and the charitable deduction rate remains at 14¢ per mile. 12/10/09

IR-2008-131, Rev. Proc 2008-72. The 2009 standard mileage reimbursement rate will be 55¢ per mile for business miles driven, 24¢ per mile driven for medical or moving purposes, and 14¢ per mile driven in service of charitable organizations 11/26/08

Fair market values for employer-provided vehicles using the cents-per-mile valuation

IRS.gov – Topic 510 – Business Use of Car

IRS.gov – Employer’s Tax Guide to Fringe Benefits (see page 25 “Lease Value Rule”)

Capital gain tax rates

IRS.gov capital gain rates

2009 Income Tax Rates

IRS.gov rate table

IRS Withholding Calculator

standard deduction amounts

IRS.gov

The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. You cannot take the standard deduction if you claim itemized deductions.

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $900 or the sum of $300 and the individual’s earned income.

An individual who was a nonresident alien or dual status alien during any part of the year (note that residents of India may be able to claim the standard deduction if they meet certain criteria. Refer to Publication 519, U.S. Tax Guide for Aliens, for more information.)

Additional standard deduction amounts

The additional standard deduction amount for age, blindness, or both is specified by law and varies based on your filing status. If you are married, file a separate return, and your spouse has no gross income, you are allowed any additional amounts that apply to you or your spouse, provided your spouse is not the dependent of another taxpayer.

The additional standard deduction amounts under § 63(f) for the aged (65 or older) and for the blind are $1,050 for each, increased to $1,350 if also unmarried and not a surviving spouse.

Itemized deduction phase out

The “applicable amount” of adjusted gross income under § 68(b) (above which the amount of otherwise allowable itemized deductions is reduced under § 68) is $159,950 (or $79,975 for a separate return filed by a married individual). See Form 1040, Schedule A Instructions for the limitation amounts.

Exemption amount

IRS.gov – Publication 501 (2009), Exemptions, Standard Deduction, and Filing Information

see “exemptions“

Exemptions reduce your taxable income. Generally, you can deduct $3,650 for each exemption you claim in 2009. You may lose part of your exemptions if your adjusted gross income is above a certain amount. See Phaseout of Exemptions.

“Kiddie tax” – unearned income of minor children taxed as if parent’s income

IRS.gov

The § 1(g)(4)(A)(ii)(I) amount is used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax.” (This amount is the same as the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer.) A child’s gross income must be more than $1,900 but less than $9,500 for a parent to elect to include a child’s gross income in the parent’s gross income and for calculating the “kiddie tax” to satisfy that requirement.

For a child to whom the § 1(g) “kiddie tax” applies, the alternative minimum tax exemption amount under § § 55 and 59(j) may not exceed the child’s earned income for the taxable year, plus $6,400.

A parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return, if specified conditions are met. The parent is the parent qualified to make the election or files a joint return with the child’s other parent To make this election, attach Form 8814 (PDF), Parents’ Election to Report Child’s Interest and Dividends.

The Small Business and Work Opportunity Tax Act of 2007 (H.R. 2206) expanded the kiddie tax to apply to children who are under age 19 or who are full-time students under age 24 (14 in 2005, under 18 in 2006).

Adoption credit

IRS.gov – Topic 607 – Adoption Credit

You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child (§ 23(b)(1)) (including a child with special needs, § 23(a)(3)) subtracted from your tax liability. a Credit for expenses paid prior to the year the adoption becomes final are generally allowed for the year following the year of payment. The available adoption credit begins to phase out for taxpayers with modified adjusted gross income exceeding certain limits.

For the current credit amounts and totake the credit or exclusion, complete Form 8839 (PDF), Qualified Adoption Expenses, and attach the form 1040.

Adoption Assistance Programs.

In addition to the credit, certain amounts paid by your employer pursuant to an adoption assistance program for qualifying adoption expenses may be excludable from your gross income, § 137(a)(2) (child with special needs) and § 137(b)(1).The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of certain limits.

Child tax credit § 24

IRS.gov

The credit is limited if your modified adjusted gross income is above a certain amount.

The additional child tax credit may give you a refund even if you do not owe any tax., § 24(d)(1)(B)(i) (see Pub. 972, page 3).

American opportunity tax credit (AOC) (Hope and lifetime learning credits) (§ 25A)

IRS.gov

The maximum amount of the AOC increases to $2,500 per student. The credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return – 2009).

The term “qualified tuition and related expenses” has been expanded to include expenditures for “course materials.” For this purpose, the term “course materials” means books, supplies, and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

The AOC can now be claimed for the first four years of post-secondary education. Previously the credit could be claimed for only the first two years of post-secondary education.

The credit is phased out (gradually reduced) if your modified adjusted gross income (AGI) is between certain amounts.

Generally, 40% of the AOC is now a refundable credit, which means that you can receive up to $1,000 even if you owe no taxes.

Earned income credit (EIC) § 32(b)

See also IRS.gov:

To qualify you must work and have “earned income” from employment, self-employment or another source and meet certain rules. You must either meet the additional rules for Workers without a Qualifying Child or have a child that meets all the Qualifying Child Rules. The “earned income amount” is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The “threshold phase out amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The “completed phase out amount” is the amount of adjusted gross income (or if greater, earned income) at or above which no credit is allowed. If you are married, you must file a joint return to receive the credit. You must be a US citizen or resident alien all year to qualify.

If your earned income credit (EIC) for any year after 1996 was denied (disallowed) or reduced by the IRS, you may need to complete an additional form (8862) to claim the credit.

Your qualifying child cannot be used by more than than one person. You can choose which person will claim the EIC and all of the following 5 tax benefits based on the qualifying child: child’s exemption; child tax credit; Head of household filing status; credit for child and dependent care expenses; exclusion for dependent care benefits.

To be your qualifying child, a child must be your:

  • Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or
  • Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew).

If your child was married at the end of the year, he or she does not meet the relationship test unless either of these two situations applies to you:

  1. You can claim the child’s exemption, or
  2. The reason you cannot claim the child’s exemption is that you gave that right to your child’s other parent under the Special rule for divorced or separated parents, described later.

Age Test – Your child must be:

  1. Under age 19 at the end of the year,
  2. Under age 24 at the end of the year and a student, or
  3. Permanently and totally disabled at any time during the year, regardless of age.

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer. Investment income must be less a certain amount for the year or the EIC is denied.

Advance Earned Income Tax Credit (advance EITC)

Don’t overlook the state credit 7/4/10

If you qualify to claim EITC on your federal income tax return, you also may be eligible for a similar credit on your state or local income tax return. Twenty-two states, the District of Columbia, New York City, and Montgomery County, Maryland, offer their residents an earned income tax credit. More information on states with EITC.

§ 179 expense

A taxpayer may elect to expense up to $250,000 (§ 179(b)(1)), reduced (but not below zero) by the the cost of § 179 property placed in service during the 2009 taxable year in excess of $800,000.

Educator expenses deduction

new

IRS.gov – Topic 458 – Educator Expense Deduction 7/4/10

An eligible educator in 2009 can deduct up to $250 of qualified expenses paid in 2009 as an adjustment to gross income, rather than as a miscellaneous itemized deduction. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Qualified expenses do not include expenses for home schooling or nonathletic supplies for courses in health or physical education.

Eligible Long-Term Care Premiums

For 2009, the maximum amount of qualified long-term care premiums under § 213(d)(10) you can include as medical expenses has increased. You can include qualified long-term care premiums, up to the amounts shown below, as medical expenses on Schedule A (Form 1040).

Age 40 or under – $320.
Age 41 to 50 – $600.
Age 51 to 60 – $1,190.
Age 61 to 70 – $3,180.
Age 71 or over – $3,980.

Social Security / Medicare tax

2009/2010 limits

Transfer tax exemptions and rates (estate and gift) 2/2/08

YearEstate and GST tax exceptions 1Gift tax exemptionsHighest estate, GST and gift tax rate
2007 $2 million$1 million45%
2008 $2 million$1 million45%
2009 $3.5 million$1 million45%
2010 (repealed)$1 million35% 3
2011 $2 million 2$1 million35%

1 Less any gift tax and GST tax exemption, respectively, used during life.

2 The GST tax exemption is adjusted for inflation.

3 Gift tax only, Equal to highest marginal income tax rate, which is currently 35%.

The first $13,000 (2009 and after) of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.

The first $128,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § § 2503 and 2523(i)(2) made during that year.

Retirement contribution limits

updated

2011 and 2012 IRA Contribution and Deduction Limits 1/10/12

updated

Defined Contribution Plan (for example, 401(k), profit-sharing) Contribution Limits 1/10/12

Elective deferrals that an employee has chosen to contribute from his or her compensation to a 401(k), 403(b) or 457 plan are further limited to $16,500 in 2009 or 100% of his or her compensation, which ever is less, except for catch-up contributions.

Catch-Up Contributions. Individuals who are age 50 or over at the end of the calendar year can make annual catch-up contributions.