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Federal Tax Brackets & Law Changes For 2009.

So what changes do we have in store for the 2009 tax year? Each and every year there are small changes to the ridiculously large and wordy tax code, but most of them will not effect the average taxpayer. (Good thing, really – who wants to know all of that stuff!) However, there are some that definitely will, so I went looking to see what they are…and here is what I found out:

The Income Tax Brackets Have Changed.

Singles:

  • 10% Tax Bracket – $0-$8,350
  • 15% Tax Bracket – $8,350-$33,950
  • 25% Tax Bracket – $33,950-$82,250
  • 28% Tax Bracket – $82,250-$171,550
  • 33% Tax Bracket – $171,550-$372,950
  • 35% Tax Bracket – $372,950+

Married Filing Jointly:

  • 10% Tax Bracket – $0-$16,700
  • 15% Tax Bracket – $16,700-$67,900
  • 25% Tax Bracket – $67,900-$137,050
  • 28% Tax Bracket – $137,050-$208,850
  • 33% Tax Bracket – $208,850-$372,950
  • 35% Tax Bracket – $372,950+

Married Filing Separately:

  • 10% Tax Bracket – $0-$8,350
  • 15% Tax Bracket – $8,350-$33,950
  • 25% Tax Bracket – $33,950-$68,525
  • 28% Tax Bracket – $68,525-$104,425
  • 33% Tax Bracket – $104,425-$186,475
  • 35% Tax Bracket – $186,475+

Head Of Household:

  • 10% Tax Bracket – $0-$11,950
  • 15% Tax Bracket – $11,950-$45,500
  • 25% Tax Bracket – $45,500-$117,450
  • 28% Tax Bracket – $117,450-$190,200
  • 33% Tax Bracket – $190,200-$372,950
  • 35% Tax Bracket – $372,950+

And here is some more income tax bracket info from my friend Ryan.

The Standard Deduction Went Up.

  • The standard deduction for single filers goes up to $5,700 from $5,450 last year.
  • For joint filers the deduction will be $11,400, which is up from $10,900.

The Amount You Can Save In Your 401K Retirement Account Went Up.

  • Under 50? You can now contribute $16,500 each year.
  • Over 50? You can now contribute $22,000 each year.

The Amount You Can Save In Your Traditional Or Roth IRA Account.

  • Under 50? You can now contribute $5,000 each year.
  • Over 50? You can now contribute $6,000 each year.

The Mileage Deduction Has Decreased.

  • In 2008 you were able to deduct $.585 per mile for business travel, but in 2009 that deduction has dropped to $.55 per mile. Just be sure you are actually traveling for business if you take this deduction!

The Gift Tax Exclusion Went Up.

  • The gift tax exclusion is now $13,000, up $1,000 from 2008. This means you can give up to $13,000 tax free to anyone else, up to a maximum of $1 million in your life. Wish I could give away that kind of money…

The Earned Income Tax Credit Has Gone Up.

  • The maximum tax credit for low and moderate income workers and families with two or more children is now $5,028, up from $4,824 in 2008. Income limit on this credit is now $43,415 for 2009, up from $41,646 last year.

Check out what Cash Money Life had to say about the increased 401k contribution limits in 2009 and please, let me know if I missed anything that should be on the list. These are probably the ones that will affect the most people, but maybe I missed a few? If so, let me know in the comments!

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Comments (36)

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  1. Miranda says:

    Thanks for the information. We’re bordering on a new tax bracket. Guess we’ll have to see what we can do to keep it a little lower for one more year.

  2. Shaun says:

    Miranda

    There is no reason to try and keep your income down. When you move to a new tax bracket, it is not all of your income that is taxed at the new rate. It is only the amount in that bracket that is taxed at that rate.

    For example, a couple making $70,000, filing jointly, would have this tax burden:
    First $16,700 – 10% = $1,670
    Next $51,200 – 15% = $7,680
    Last $ 2,100 – 25% = $ 525
    TOTAL $70,000 = $9,875

  3. Thanks for the info – it’s always good to find a brief summary of the changes that apply to most of us.

  4. Doctor S says:

    Wow this is a great piece with information that normally people would never find nor choose to look for so great work, extremely helpful. I am going to work tomorrow, printing out the link and pasting it on my employees cube that was arguing with me about the tax bracket of 25%!! Then ill pass him the link!

  5. david says:

    Glad I could help!

  6. Rio says:

    Any change to the Personal Exemption amount? It’d be nice to see that next to Standard Deduction.

  7. Rio says:

    Any change to the Personal Exemption amount? It’d be nice to see that next to Standard Deduction.

  8. David says:

    Looks like it is $3,650 – at least thats the amount I could find Rio!

  9. crackgerbal says:

    Thank for the post. This will really help people who are on the line for different tax brackets. Thanks for posting, very useful.

  10. hendr7i says:

    Thanks for the info

  11. aan says:

    hmm…i guest i could follow those instructions

  12. Chris says:

    Thanks.. It’s almost time for me to begin filing. This info came at just the right time.

  13. Brandon says:

    Very useful information. I’m always looking for a place to find updated tax tips. I appreciate what you have done here.
    Best,
    TAM

  14. usd6 says:

    This is a good article, thank you from the information received
    Thanks!

  15. Arthur says:

    Great information in “plain speak.”

    With the Stimulus Package moments from being signed into law, how does it affect my taxes if I purchase a new car and pay $3500 in sales tax? Do I deduct that $3500 from my total income?

  16. David says:

    Maybe – not sure though.

  17. Jo says:

    Ok…If our tax tables for our paychecks are changing (my income tax withheld per month is dropping $67), are our tax brackets for 2009 going to be similar to 2008? In other words, my question is, do I need to change my W-4 to match my old Fed. Income tax withheld so that the normal refund i get from IRS will be close to the same amount?

  18. david says:

    I would imagine you could have them take out a few extra bucks each month if you want everything to stay the same. The tax brackets should stay the same, just how much is taken out is changing.

  19. Robert says:

    My wife and I only got an $80 refund this year. So with fed. taxes going down by quite a bit, we probably will have to pay next year unless we change our W-4 federal withholding’s correct?

  20. david says:

    “Only” $80 is pretty good; I never get a refund as I refuse to let them use my money interest free, I always owe. Taxes are going down, so if you left everything the same as you have it now, you would get a bigger refund. If taxes were going up, you would have to pay more.

  21. Chuck says:

    How will the federal tax changes affect my state taxes since the state taxes are based on federal withholdings?

  22. david says:

    state taxes stay the same.

  23. Chuck says:

    My state withholdings are 23% of the federal.
    Since the federal has gone down would that not mean I need to withhold more to keep from having to pay?
    Thanks for your time.

  24. david says:

    Your State tax is not figured in relation to your Fed – it’s based on your State’s rate. For instance, I live in NM and the rate is really low compared to when I lived in CA – it is not tied to the Fed rate. So that won’t be affected by the Fed change.

  25. Chuck says:

    Just an FYI. Arizona is the only state that basees the state tax on federal so it will affect my state at the end of the year.My question was answered though after getting some other information.

  26. david says:

    Interesting, thanks for letting me know!

  27. jack says:

    Several employees are not having federal taxes withheld from their checks even though they are claiming just 1 or 2 exemptions…. Should they change their number of exemptions? Many are worried they will have to pay big money end of the year

  28. david says:

    Not sure what you mean…why would anyone have “no” taxes taken out of their check? Never heard of that at all..

  29. val says:

    Heard rumor that charitable deductions will not be allowed for those in higher brackets. True?

  30. Chris says:

    My wife who claims zero on her W4 in order to get more money back on her return was not having any federal tax withheld from her part time job. HR informed her that she was going to owe big time on this years returns. They were not withholding because of the size of the paychecks (under $609).

  31. angel b. says:

    what are the tax changes for CA for 2009? I know taxes went up but how will it affect when filing jointly? Also is there any changes regarding iteamizing and deductions?

  32. Rocky says:

    I just did my federal taxes and noticed a change in the retirement credit. In previous tax years the retirement credit was in addition to the child tax credit. For 2009, the child tax credit is reduced by the retirement credit amount, in effect wiping out the retirement. I was blindsided by this, but of course it is not the reason I contribute to a 401. I suppose this change (in my case 200, the max for my income) may be offset other benefits, or maybe not. It is annoying nevertheless to lose a credit.

  33. BrandyA says:

    I’m confused! We moved up a tax bracket this year, but the government decided not to take enough from me and we owe this year. This has never happened! What changed? What does the IRS base how much they take on?

  34. David says:

    The government doesnt decide how much to take – you have to change your withholdings on your paycheck.

  35. tre says:

    To brandu. i have exactly the same thing. i have never paid in before and i have always claimed the same. the money amount is near the same for the past 12 years and this year i have to pay in. the tax brackets have moved around and put nearly everyone in a lower bracket and now we all have to pay the shortages. the claiming amount is irrelevant at this time. i know several people having the same issue and they are in disbelief as well.

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