2015 Tax Brackets

October 02, 2014

Click here for 2016 Tax Brackets

Introduction

Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation instead of an actual increase in real income.

The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly. Rather than directly adjusting last year’s values for annual inflation, each provision is adjusted from a specified base year. For more information, see the methodology, below.

Estimated Income Tax Brackets and Rates

In 2015, the income limits for all brackets and all filers will be adjusted for inflation and will be as seen in Table 1. The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $413,200 and higher for single filers and $464,850 and higher for married filers.

Table 1. 2015 Taxable Income Brackets and Rates

Rate

Single Filers

Married Joint Filers

Head of Household Filers

10%

$0 to $9,225

$0 to $18,450

$0 to $13,150

15%

$9,225 to $37,450

$18,450 to $74,900

$13,150 to $50,200

25%

$37,450 to $90,750

$74,900 to $151,200

$50,200 to $129,600

28%

$90,750 to $189,300

$151,200 to $230,450

$129,600 to $209,850

33%

$189,300 to $411,500

$230,450 to $411,500

$209,850 to $411,500

35%

$411,500 to $413,200

$411,500 to $464,850

$411,500 to $439,000

39.6%

$413,200+

$464,850+

$439,000+

Source: Author’s calculations.

 

Standard Deduction and Personal Exemption

The standard deduction will increase by $100 from $6,200 to $6,300 for singles (Table 2). For married couples filing jointly, it will increase by $200 from $12,400 to $12,600.

The personal exemption for 2015 be $4,000.

Table 2. 2015 Standard Deduction and Personal Exemption

Filing Status

Deduction Amount

Single

 $                            6,300.00

Married Filing Jointly

 $                          12,600.00

Head of Household

 $                            9,250.00

Personal Exemption

 $                            4,000.00

Source: Author’s calculations.

 

PEP and Pease

PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phaseout of the personal exemption and Pease (named after former Senator Donald Pease) reduces the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain point.

The income threshold for both PEP and Pease will be $258,250 for single filers and $309,900 for married filers (Tables 3 and 4). The PEP phaseout will end at $380,750 for singles and $432,400 for couples filing jointly, meaning these taxpayers will no longer have a personal exemption.

Table 3. 2014 Pease Limitations on Itemized Deductions 

Filing Status

Income

Single

 $     258,250.00

Married Filing Jointly

 $     309,900.00

Head of Household

 $     284,050.00

Source: Author’s Calculations

 

Table 4. 2015 Personal Exemption Phaseout 

Filing Status

Phaseout Begin

Phaseout Complete

Single

 $          258,250.00

 $        380,750.00

Married Filing Jointly

 $          309,900.00

 $        432,400.00

Head of Household

 $          284,050.00

 $        406,550.00

Source: Author’s calculations.

 

Alternative Minimum Tax

Since its creation in the 1960s, the Alternative Minimum Tax (AMT) has not been adjusted for inflation. Thus, Congress was forced to “patch” the AMT by raising the exemption amount to prevent middle class taxpayers from being hit by the tax as a result of inflation.

On January 2, 2013, the American Taxpayer Relief Act of 2012 indexed the income thresholds to inflation, preventing the necessity for an annual patch.

The AMT exemption amount for 2015 is $53,600 for singles and $83,400 for married couple filing jointly (Table 5).

Table 5. 2015 Alternative Minimum Tax Exemptions 

Filing Status

Exemption Amount

Single

 $            53,600.00

Married Filing Jointly

 $            83,400.00

Married Filing Separately

 $            41,700.00

Source: Author’s calculations.

 

Earned Income Tax Credit

2015’s maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $503 if the filer has no children (Table 6). For one child the credit is $3,359, two children is $5,548, and three or more children is $6,242.

Table 6. 2015 Earned Income Tax Credit Parameters 

Filing Status

 

No Children

One Child

Two Children

Three or More Children

Single or Head of Household

Income at Max Credit

$6,580

$9,880

$13,870

$13,870

 

Maximum Credit

$503

$3,359

$5,548

$6,242

 

Phaseout Begins

$8,240

$18,110

$18,110

$18,110

 

Phaseout Ends (Credit Equals Zero)

$14,820

$39,131

$44,454

$47,747

           

Married Filing Jointly

Income at Max Credit

$6,580

$9,880

$13,870

$13,870

 

Maximum Credit

$503

$3,359

$5,548

$6,242

 

Phaseout Begins

$13,760

$23,630

$23,630

$23,630

 

Phaseout Ends (Credit Equals Zero)

$20,330

$44,651

$49,974

$53,267

Source: Author’s calculations.

 

Each tax parameter is adjusted for inflation by taking its base value (from legislation) and multiplying it by the current fiscal year’s average Consumer Price Index (CPI) and then dividing that by the base fiscal year’s CPI.

Each parameter is rounded to either the nearest $10, $25, or $100 (depending on the specified rounding method in the legislation).

For example, the base value for the top of the 10 percent tax bracket for singles is $7,000. This number is multiplied by the average CPI for fiscal year 2014 (235.69) and then divided by the average CPI for fiscal year 2002 (178.68): $7,000 * (235.69/178.68) = $9233. This value is then rounded down to the nearest $25 to yield 2015’s 10 percent tax bracket of $9,225.

 

Table 7. Tax Parameters, Base Years, and Base Values

Base Year

Parameter

Base Value (Single; HoH; Married)

Rounding Convention

1987

Standard Deduction

$3,000; $4,400; $6,000

Down to nearest $50

1988

Personal Exemption

$2,000

Down to nearest $50

1992

15% Bracket

$22,100; $29,600; $44,200

Down to nearest $50

 

25% Bracket

$53,500; $76,400; $89,150

Down to nearest $50

1993

28% Bracket

$115,000; $127,500; $140,000

Down to nearest $50

 

33% Bracket

$250,000; $250,000; $250,000

Down to nearest $50

1995

EITC

See Table 8, below

Nearest $1

2002

10% Bracket

$7,000; $10,000; $14,000

Down to nearest $25

2008

EITC Marriage Penalty Fix

$5,000

Nearest $10

2011

AMT

$50,600, N/A, $78,750

Nearest $100

2012

35% Bracket

$400,000; $425,000; $450,000

Down to nearest $50

 

PEP

$250,000; $275,000; $300,000

Down to nearest $50

 

Pease

$250,000; $275,000; $300,000

Down to nearest $50

Note: Bracket values are the tops of each bracket.

 

 Table 8. EITC Base Parameters

 

No Children

One Child

Two Children

Three or More Children

Credit Rate

7.65%

34%

40%

40%

Phaseout Rate

7.65%

15.98%

21.06%

21.06%

Income, Max Credit

$4,220

$6,330

$8,890

$8,890

Income, Phaseout

$5,280

$11,610

$11,610

$11,610

NOTE: Click these links to see the 2013 tax brackets and 2014 tax brackets.

 

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