CCH Tax & Accounting has prepared projected inflation-adjusted tax bracket numbers for the 2010 Tax Rate Schedules, the standard deduction and personal exemption for use in year-end and 2010 tax planning. The projected figures are based on the inflation-adjustment provisions of the Internal Revenue Code (IRC) as currently in force and the average of the Consumer Price Index for All Urban Consumers (CPI-U) published by the Department of Labor for each month in the 12-month period ending on August 31, 2009. Official IRS figures will not be released until later in 2009.

Due to the historically low inflation rate of below 0.2 percent for purposes of tax indexing, many 2010 indexed amounts will increase only slightly. Some, in fact, will not increase at all for the first time since indexing started in the early 1980s because of the combination of negligible inflation and application of "rounding-down" indexing rules found in the IRC.

Tax Brackets

• Joint returns.
  For married taxpayers filing jointly and surviving spouses, the maximum taxable income subject to the 10-percent bracket will rise from $16,700 in 2009, to $16,750 in 2010; the top of the 15-percent tax bracket will increase from $67,900 to $68,000. The bracket amounts for the remaining tax rates will show similarly proportionate increases: $137,300 as the maximum for the 25-percent bracket (up $250 from 2009); $209,250 for the 28-percent bracket (up $400 from 2009); and $373,650 for the 33-percent bracket (up $700 from 2009). Amounts above the $373,650 level will be taxed at the 35-percent rate.
  
  
• Unmarried filers.
  For single taxpayers, the maximum taxable income for the 10-percent bracket will increase to $8,375 for 2010 (up from $8,350 in 2009). The remainder of the rate brackets show inflation increases of: $50 for the top of the 15-percent bracket (to $34,000); $150 for the 25-percent bracket (to $82,400); $300 for the 28-percent bracket (to $171,850); and $700 for the top of the 33-percent bracket (to $373,650).
  
  
• Married filing separately.
  Married taxpayers filing separately will see a $25 increase for the upper limit of the 10-percent bracket (to $8,375) and a $50 increase for the 15-percent bracket (to $34,000). The top of the 25-percent bracket will increase by $125 (to $68,650); the 28-percent bracket will increase by $200 (to $104,625); and the 33-percent bracket will increase by $350 (to $186,825).
  
  
• Heads of household.
  For heads of households, the maximum taxable income for the 10-percent bracket will see no increase, holding at $11,950. The top of the remainder of the bracket amounts will increase only slightly: up $50 from 2009 for the 15-percent bracket, to $45,550; up $200 from 2009 for the 25-percent bracket, to $117,650; up $350 from 2009 for the 28-percent bracket, to $190,550; and up $700 from 2009 for the top of the 33-percent bracket, to $373,650.
  
  
• Estates and trusts.
  For estates and nongrantor trusts, there will be no changes in the rate bracket amounts from 2009 levels, except a $50 increase in the highest 35 percent bracket. For 2010, brackets amounts will end at $2,300 for the 15-percent bracket (there is no 10-percent bracket for these taxpayers); $5,350 for the 25-percent bracket, and $8,200 for the 28-percent bracket. The top of the 33-percent bracket will rise to $11,200 in 2010.

Standard Deduction

The 2010 standard deduction will stay put for all taxpayers except heads of households, who will see a $50 increase because of rounding conventions. The standard deduction amounts for 2010 will be $5,700, for single taxpayers; $8,400, for heads of households; $11,400, for married taxpayers filing jointly and surviving spouses; and $5,700, for married taxpayers filing separately. The standard deduction for dependents also hold at $950 (or earned income plus $300).

Personal Exemptions

The amount of personal and dependency exemptions for 2010 will remain at their 2009 level of $3,650.

Gift Tax

The gift tax annual exemption, which rose from a base of $10,000 to $11,000 in 2002; $12,000 in 2006, and $13,000 in 2009, will remain at $13,000 for 2010. Pursuant to the IRC, the exemption can rise only when the inflation adjustment produces an increase of $1,000 or more.

Other Tax Figures

In addition to the projected tax figures for 2010 listed above, the IRC requires other possible adjustments based on the September 2008 through August 2009 CPI amounts. These additional amounts include:

• Code Sec. 179 expensing. Unless Congress intervenes, Code Sec. 179 expensing will return to pre-2008 levels for 2010. For tax years beginning in 2010, the Code Sec. 179 expensing limit will be $134,000 and the cost-of-equipment limit set at $530,000. (Note: Expensing is currently scheduled to return to $25,000 ($200,000) levels in 2011.)
  
  
• Roth IRAs. The AGI limits for maximum Roth IRA contributions will be: married filing jointly, $167,000 ($166,000 in 2009); the AGI limit for other filing statuses, other than married filing jointly or separately, will remain at $105,000.
  
  
• IRAs. The AGI limits for maximum IRA contributions for individuals covered by a retirement plan will remain at $89,000 for married filing jointly, but rise by $1,000 to $56,000 for head of household and single filers. The AGI limit for joint filers when only one spouse is covered by a retirement plan will be $167,000 in 2010. The maximum on base IRA contribution amount, which is subject to indexing, nevertheless will remain at $5,000 for 2010.
  
  
• Saver's Credit. For 2010, the saver's credit will be available based on AGI limit and filing status as follows: Joint filers: $33,500 AGI for a 50 percent credit; $36,000 for a 20 percent credit, and $55,500 for a 10 percent credit. Head of household: $25,125 AGI for a 50 percent credit; $27,000 for a 20 percent credit, and $41,625 for a 10 percent credit. Other filers: $16,750 AGI for a 50 percent credit; $18,000 for a 20 percent credit, and $27,750 for a 10 percent credit.
  
  
• Education savings bond interest exclusion. When U.S. savings bonds are redeemed to pay expenses for higher education, the interest may be excluded from income if the taxpayer's income is below a certain range. For 2010, that phase-out range for singles will be $70,100 - $85,100 and for joint filers, $105,100 - $135,100 (up from starting points of $69,950 and $104,900, respectively, in 2009)
  
  
• Student loan interest income phaseout. The $2,500 student loan interest deduction phaseout will begin at $60,000 AGI for singles, and $120,000 for joint filers in 2010. These levels represent no change from 2009.
  
  
• Adoption expense credit. This $10,000 maximum credit was first subject to an inflation adjustment after 2002. For 2010, the amount will increase to $12,170 ($20 more than in 2009), with the AGI phaseout beginning at $182,520 (up $340 from 2009).
  
  
• Transportation fringe benefits. The monthly cap on the exclusion of qualified parking expenses will be $230 in 2010, as it is in 2009. Because of a recent law change, the $230 amount also applies to van pooling and transit passes.
  
  
• Medical savings accounts. The minimum-maximum range for MSAs in 2010 will be $2,000 - $3,000 with a $4,050 maximum out of pocket for single plans and $4,050 - $6,050 with $7,400 out of pocket for family plans.
  
  
• Long-term care insurance. The per diem exclusion for long-term care insurance proceeds for 2010 will be $290 per day. The dollar level of long-care premiums deductible as health insurance premiums will range from $330 for those 40 years or younger to $4,110 for those over 70 years of age.
  
  
• Gifts to noncitizen spouses. The first $134,000 of gifts in 2010 to a spouse who is not a U.S. citizen will not be included in taxable gifts, up $1,000 from 2009.
  
  
• Foreign gifts. A U.S. person receiving aggregate foreign gifts exceeding $14,165 in 2010 will be required to file an information return.
  
  
• Foreign earned income. The amount of the foreign earned income exclusion under Code Sec. 911 for 2010 will be $91,500. The foreign earned income housing deduction for 2010 will be set at $27,450.
  
  
• Expatriation exclusion. The exclusion of income from deemed sales upon expatriation will rise to $627,000 in 2010.

No Adjustments

Some tax figures that have been indexed in past years, will not be indexed for 2010. This group includes:

• Personal exemption phaseout, which is repealed entirely for 2010;
• Itemized deductions phaseout, which is repealed entirely for 2010;
• A more generous American Opportunity Tax Credit for 2009 and 2010, which temporarily replaces the Hope and Lifetime Learning Credits; and
• A lower refundable child credit earned income threshold of $3,000 for 2009 and 2010. This amount is set by statute.