IRS Increases Standard Deduction, Exemptions, Thresholds

The IRS has released Revenue Procedure 2001-59 which includes the new 2002 tax tables as well as numerous inflation-related changes to tax deductions, credits, and exemptions.

The 2002 standard deduction is increased to the following amounts:

• $7,850 for married filing jointly and surviving spouses
  
• $6.900 for heads of households
  
• $4,700 for single
  
• $3,925 for married filing separately

The standard deduction for taxpayers who may be claimed as dependents by another taxpayer may not exceed the greater of $750 or the sum of $250 and the dependent's earned income.

The personal exemption for 2002 is increased to $3,000.

The phase-out ranges for personal exemptions are the following adjusted gross income amounts:

• Married filing jointly and surviving spouses: $206,000 to $328,500
  
• Head of household: $171,650 to $294,150
  
• Single: $137,300 to $259.800
  
• Married filing separately: $103,000 to $164,250

The income limits for the maximum earned income credit have increased to the following amounts:

• $7,370 for a qualifying individual with one child
  
• $10,350 for a taxpayer with two or more children
  
• $4,910 for a taxpayer with no children

The adjusted gross income amount that triggers a reduction in itemized deductions in 2002 will be $137,300 for all taxpayers except married filing separately who will use $68,650 as the ceiling.