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June 8, 2015 8:05 am
Tax Nostalgia
While many tax limits and threshold amounts are fixed by the Tax Code, a great many others are adjusted annually for inflation by law or IRS discretion. Despite the fact that the rate of inflation has been very low in recent years, over time some tax limits have changed dramatically. The information in the following table gives you a perspective on how some of these tax limits have changed over the past 25 years.
|
Tax item |
1990 |
2015 |
| Top individual income tax rate | 33% | 39.6% |
| Kiddie tax threshold for investment income | $1,000 | $2,000 |
| Personal exemption amount | $2,050 | $4,000 |
Standard deduction amounts
|
$5,450$4,750
$3,250 $2,725 |
$12,600$9,250
$6,300 $6,300 |
Additional standard deduction for age/blindness
|
$650/spouse$800 | $1,250$1,550 |
| Standard deduction for dependent (<65/not blind) | $500 | $1,050 |
| Social Security wage base | $51,300 | $118,000 |
IRS mileage rate
|
26¢ per mile9¢ per mile | 37.5¢ per mile23¢ per mile |
| 401(k) elective deferral from salary | $7,979 | $18,000 ($24,000 for those 50+) |
| IRA contribution | $2,000 | $5,500 ($6,500 for those 50+) |
| SEP contribution | $30,000 | $53,000 |
| First-year expensing (Sec. 179 deduction) | $10,000 | $25,000 (or $500,000 if the 2014 limit is extended) |
| Foreign earned income exclusion | $70,000 | $100,800 |
| Annual gift tax exclusion | $10,000 | $14,000 |
| Estate tax exemption | $600,000 | $5,430,000 |
Conclusion
While many dollar limits have kept pace, more or less, with inflation, other limits have remained unchanged. Examples: $3,000 capital loss deduction limit; $5,250 exclusion for employer-provided education assistance. This means that the true benefit of these tax breaks has diminished considerably over time. However, with a new Congress, comprehensive tax reform may be in the offing, and hopefully all dollar limits will be reviewed and adjusted accordingly.
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Tax Glossary
Casualty loss
Loss from an unforeseen and sudden event that is deductible, subject to a 10% income floor and $100 reduction for personal losses.
