A Sneak Peek at 2014 Taxes; Forecasting next year's IRS inflation adjustments, which affect tax brackets and more.
Inflation might be tame, but it still is going to affect your taxes next year.</br></br>The Internal Revenue Service won't release the official numbers for inflation adjustments to tax-code provisions affecting individuals in 2014 until later this year. But some experts have released their own projections.</br></br>James Young, the Crowe Horwath professor of accountancy at Northern Illinois University, and specialists at tax publisher CCH, a unit of Wolters Kluwer, say the official inflation rate used to adjust the numbers will be about 1.6%, lower than last year's 2.5% rate and 2011's 3.8% rate. Their estimates are based on data released by the U.S. Department of Labor.</br></br>Most taxpayers will experience modest savings from inflation indexing, says Mark Luscombe, principal analyst at CCH. A married couple filing jointly who have $100,000 of taxable income, for example, will owe about $145 less for 2014 compared with 2013 because of tax-bracket indexing, and they also will realize small gains from changes to the personal exemption and the standard deduction.</br></br>Congress added the adjustments to the tax code starting in the late 1980s in an effort to prevent taxpayers from owing more simply because inflation pushed them into higher brackets and eroded benefits. Many--but not all--provisions are adjusted annually.