This morning, the Bureau of Labor Statistics released its August 2011 estimate for the Consumer Price Index (CPI), which allows us to determine what next year’s taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. brackets will look like. The IRS uses CPI numbers to adjust tax bracketA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. s (and other parameters) for inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. ; each year’s brackets are based on the CPI-U from September to August of the previous year. The August 2011 number is therefore the final piece of data needed to determine the tax brackets for 2012.
| Key Tax Parameter Amounts for 2012 | ||
| Tax Parameter | 2011 Amount | 2012 Amount |
| Standard Deduction | ||
| For singles | $5,800 | $5,950 |
| For married filing jointly | $11,600 | $11,900 |
| For heads of households | $8,500 | $8,700 |
| For married filing separately | $5,800 | $5,950 |
| Personal Exemption | $3,700 | $3,800 |
| Tax Bracket Thresholds for Single Filers | ||
| 10% rate | $0 | $0 |
| 15% rate | $8,500 | $8,700 |
| 25% rate | $34,500 | $35,350 |
| 28% rate | $83,600 | $85,650 |
| 33% rate | $174,400 | $178,650 |
| 35% rate | $379,150 | $388,350 |
| Tax Bracket Thresholds for Heads of Households | ||
| 10% rate | $0 | $0 |
| 15% rate | $12,150 | $12,400 |
| 25% rate | $46,250 | $47,350 |
| 28% rate | $119,400 | $122,300 |
| 33% rate | $193,350 | $198,050 |
| 35% rate | $379,150 | $388,350 |
| Tax Bracket Thresholds for Married Filing Jointly | ||
| 10% rate | $0 | $0 |
| 15% rate | $17,000 | $17,400 |
| 25% rate | $69,000 | $70,700 |
| 28% rate | $139,350 | $142,700 |
| 33% rate | $212,300 | $217,450 |
| 35% rate | $379,150 | $388,350 |
| Tax Bracket Thresholds for Married Filing Separately | ||
| 10% rate | $0 | $0 |
| 15% rate | $8,500 | $8,700 |
| 25% rate | $34,500 | $35,350 |
| 28% rate | $69,675 | $71,350 |
| 33% rate | $106,150 | $108,725 |
| 35% rate | $189,575 | $194,175 |
| Source: Tax Foundation calculations using BLS CPI-U Data |
For more information and detail, read our latest report, “Tax Foundation Projects 2012 Tax Parameters Following Release of August CPI Data.”
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