Inflation Widens Tax Brackets & Changes Benefits

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Adjustments for inflation announced Friday by the Internal Revenue Service (IRS) will increase personal exemptions and deductions, widen tax brackets and allow individuals to make larger tax-free gifts in 2006. By law, certain tax provisions, including more than three dozen tax benefits, must be revised annually in order to keep pace with inflation.

Key changes affecting 2006 tax returns (filed by most taxpayers in 2007) include:

A complete listing of inflation adjusted items for 2006 is available in Revenue Procedure 2005-70.

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