Less To The IRS Next Year

PLEASE NOTE: This press release has been revised on September 29, 2000 and reissued to reflect the Department of Labor's corrected CPIU figures.

CONTACT:
Mary Dale Walters
847-267-2038
mediahelp@cch.com

Neil Allen
847-267-2179
allenn@cch.com

LESS TO THE IRS NEXT YEAR:
CCH RELEASES TAX BRACKET CHANGES FOR 2001

(RIVERWOODS, ILL., September 29, 2000) – Some modest tax relief is in store for 2001, no matter who wins the presidential election, according to CCH INCORPORATED (CCH), which today released estimated income ranges for each 2001 tax bracket. The projections, developed by CCH, a leading provider of tax law information, indicate single and married taxpayers will pay a bit less to the Internal Revenue Service (IRS) to make up for the impact of inflation.

Although inflation has been low, the tax effects of the annual adjustment will be greater for 2001 than they have been for the last two tax years. Many people will end up ahead by the time their 2001 taxes are due, on April 15, 2002. Better still, most people can realize their savings through their withholding and estimated taxes beginning early in 2001.

Based on the projections, some typical examples of the modest decreases for the 2001 tax year include:

  • A married couple filing jointly with total taxable income of $50,000 could pay $176 less in income taxes in 2001.
  • A single filer with taxable income of $50,000 will contribute $104 less in 2001.

These decreases are due to the adjustment of tax brackets. As the upper end of each bracket is raised, more of each individual’s taxable income is taxed at lower rates.

Adjustments Add Up Over Time

According to George Jones, JD, LL.M, senior federal tax analyst for CCH, the size of the "tax"cut generated over the past five years by these inflation-factor increases is substantial.

"In 1996, the 28-percent bracket began at $40,100 for joint filers, while for 2001 it won’t begin until taxable income reaches $45,200. Using recent IRS statistics, this means that about 30 million households will have $5,100 taxed at the 15-percent level (rather than 28 percent level) in 2001 than in 1996. That’s a $650 ‘tax cut per’ taxpayer, or about $19.5 billion overall. When you add another $12 billion for those in the 28-percent and higher brackets, you get a grand total of approximately a $31.5 billion ‘tax cut’ next year when measured against what the rate brackets were in 1996."

Standard Deduction, Personal Exemption Also Rise

Adjusted for inflation, the standard deduction and personal exemption amounts are projected to increase as well for 2001. These increases can produce lower taxes by lowering the taxpayer’s taxable income.

  • Married couples filing jointly will see a projected $250 increase in their standard deduction, to $ 7,600.
  • Single taxpayers could see a $150 increase over 2000 in their standard deduction, to $4,550.
  • The personal exemption amount will go up in 2001 by $100 to $2,900.
  • Here, too, the inflation adjustments add up over time. For example, since 1988, the standard deduction for married taxpayers filing joint returns has grown through inflation by more than 50 percent, from $5,000 to the anticipated $7,600 amount for 2001.

    For a complete look at how income ranges for each tax bracket are projected to shift next year, see the attached CCH chart.

    "Kiddie" Deduction Increases

    In general, inflation adjustments are rounded to the next-lower multiple of $50, so if the adjustment produces an increase of less than $50, no increase is made. This was the case last year with the "kiddie" standard deduction used on the returns of children who are claimed as dependents on their parents’ returns. This year, however, the adjustment has finally pushed the amount of the deduction up, from $700 to $750.

    There is no change for the gift tax exemption again this year, though, so it stays at $10,000. The Internal Revenue Code only allows the exemption to rise when the inflation adjustment would produce an increase of $1,000 or more.

    Inflation Adjustments

    For more than a decade, the U.S. tax code has required that federal income tax brackets and certain other figures be adjusted for inflation annually. The adjustment is based on Consumer Price Index figures for September through August immediately prior to the adjusted year. CCH’s projections are based on the relevant inflation data reissued on September 27, 2000 by the U.S. Department of Labor.

    Annual inflation adjustments have been inserted into the Internal Revenue Code in recent years with increasing frequency. Aside from the 40 separate computations needed to inflation-adjust the tax bracket tables each year, the Code now requires over 50 other inflation-driven computations to determine deduction, exemption and exclusion amounts.

    Some items in the Code are notably not indexed for inflation, Jones noted.

    "The amount that can be contributed to an IRA has been fixed at $2,000 since 1982, whereas it would be $3,760 for 2001 if inflation adjustments were to be applied."

    The IRS usually releases official numbers in December each year. CCH tax bracket projections are provided for illustrative purposes only, and should not be used for income tax returns or other federal income tax related purposes until confirmed by the IRS later this year.

    About CCH INCORPORATED

    CCH INCORPORATED, headquartered in Riverwoods, Ill., was founded in 1913 and has served four generations of business professionals and their clients. The company annually produces more than 700 electronic and print products for the tax, legal, securities, human resources, health care and small business markets. CCH is a wholly owned subsidiary of Wolters Kluwer US. The CCH web site can be accessed at www.cch.com. The CCH Federal and State Tax site can be accessed at http://tax.cch.com.

    -- ### --

    nb-00-132

    CCH INCORPORATED's 2001 TAX PROJECTIONS*

    Married Filing Jointly(& Surviving Spouse)

    2001 Taxable Income Tax Rate 2000 Taxable Income
    $0-$45,200 15% $0-$43,850
    $45,200-$109,250 28% $43,850-$105,950
    $109,250-$166,450 31% $105,950-$161,450
    $166,450-$297,300 36% $161,450-$288,350
    $297,300 39.6% over $288,350

    Married Filing Separately

    2001 Taxable Income

    Tax Rate

    2000 Taxable Income

    $0-$22,600

    15%

    $0-$21,925

    $22,600-$54,625 28%

    $21,925-$52,975

    $54,625-$83,225 31%

    $52,975-$80,725

    $83,225-$148,650 36%

    $80,725-$144,175

    $148,650 39.6%

    over $144,175

    Single Filers

    2001 Taxable Income

    Tax Rate

    2000 Taxable Income

    $0-$27,050

    15%

    $0-$26,250

    $27,050-$65,550

    28%

    $26,250-$63,550

    $65,550-$136,750

    31%

    $63,550-$132,600

    $136,750-$297,300

    36%

    $132,600-$288,350

    $297,300

    39.6%

    over $288,350

    Head of Household

    2001 Taxable Income

    Tax Rate

    2000 Taxable Income

    $0-$36,250

    15%

    $0-$35,150

    $36,250-$93,600

    28%

    $35,150-$90,800

    $93,600-$151,600

    31%

    $90,800-$147,050

    $151,600-$297,300

    36%

    $147,050-$288,350

    $297,300

    39.6%

    over $288,350

    Standard Deduction Amounts

    Filing Status

    2001

    2000

    Increase

    Married Filing Jointly (& Surviving Spouse)

    $7,600

    $7,350

    $250

    Married Filing Separately

    $3,800

    $3,675

    $125

    Single

    $4,550

    $4,400

    $150

    Head of Household

    $6,650

    $6,450

    $200

    Standard Deduction for Dependents
    ("Kiddie" Standard Deduction)

    2001

    2000

    Increase

    $750

    $700

    $50

    Income Level At Which Three-Percent Itemized Deduction Limitation Takes Effect(Adjusted Gross Income)

    Filing Status

    2001

    2000

    Increase

    Married Filing Jointly (& Surviving Spouse)

    $132,950

    $128,950

    $4,000

    Married Filing Separately

    $ 66,475

    $ 64,475

    $2,000

    Single

    $132,950

    $128,950

    $4,000

    Head of Household

    $132,950

    $128,950

    $4,000

    Personal Exemption Amounts

    2001

    2000

    Increase

    $2,900

    $2,800

    $100

    Threshold for Personal Exemption Phaseout

    Filing Status

    2001

    2000

    Increase

    Married Filing Jointly(& Surviving Spouse)

    $199,450

    $193,400

    $6,050

    Married Filing Separately

    $ 99,725

    $ 96,700

    $3,025

    Single

    $132,950

    $128,950

    $4,000

    Head of Household

    $166,200

    $161,150

    $5,050

    Gift Tax Exemption

    2001

    2000

    Increase

    $10,000

    $10,000

    $0

    (*These numbers are projected for the 2001 tax year and have not been confirmed by the Internal Revenue Service.)

You may like these other stories...

A new government report on Monday found that the IRS may not be completing the required research steps in collecting delinquent taxes before considering the cases “not collectible.”The Treasury Inspector General...
The school year is off and running—have your start-up clients launched as well? It may make a big difference in tax status. If your clients can get their businesses up-and-running before the end of the year, they may...
Ernst & Young fiscal-year revenue rises 6% to $27.4 billionMichael Rapoport of the Wall Street Journal reported late Thursday that Ernst & Young's (EY) global revenue was $27.4 billion in its latest fiscal year,...

Already a member? log in here.

Upcoming CPE Webinars

Sep 30This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 9In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards.
Oct 15This webinar presents the requirements of AU-C 600, Audits of Group Financial Statements (Including the Work of Component Auditors).
Oct 21Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience’s communication style.