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Tax Rates

Estimated Income Tax Brackets and Rates

In 2015, the income limits for all brackets and all filers will be adjusted for inflation and will be as seen in Table 1. The top marginal income tax rate of 39.6 percent will hit taxpayers with taxable income of $413,200 and higher for single filers and $464,850 and higher for married filers.

Table 1. 2015 Taxable Income Brackets and Rates

Rate Single Filers Married Joint Filers Head of Household Filers
10% $0 to $9,225 $0 to $18,450 $0 to $13,150
15% $9,225 to $37,450 $18,450 to $74,900 $13,150 to $50,200
25% $37,450 to $90,750 $74,900 to $151,200 $50,200 to $129,600
28% $90,750 to $189,300 $151,200 to $230,450 $129,600 to $209,850
33% $189,300 to $411,500 $230,450 to $411,500 $209,850 to $411,500
35% $411,500 to $413,200 35% $411,500 to $464,850
39.6% $413,200+ $464,850+ $439,000+

Source: Author’s calculations

Standard Deduction and Personal Exemption

The standard deduction will increase by $100 from $6,200 to $6,300 for singles (Table 2). For married couples filing jointly, it will increase by $200 from $12,400 to $12,600.The personal exemption for 2015 be $4,000.

Table 2. 2015 Standard Deduction and Personal Exemption

Filing Status Deduction Amount
Single $ 6,300.00
Married Filing Jointly $ 12,600.00
Head of Household $ 9,250.00
Personal Exemption $ 4,000.00

Source: Author’s calculations.

PEP and Pease

PEP and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phaseout of the personal exemption and Pease (named after former Senator Donald Pease) reduces the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain point.

The income threshold for both PEP and Pease will be $258,250 for single filers and $309,900 for married filers (Tables 3 and 4). The PEP phaseout will end at $380,750 for singles and $432,400 for couples filing jointly, meaning these taxpayers will no longer have a personal exemption.

Table 3. 2014 Pease Limitations on Itemized Deductions

Filing Status Income
Single $ 258,250.00
Married Filing Jointly $ 309,900.00
Head of Household $ 284,050.00

Source: Author’s Calculations

 

Table 4. 2015 Personal Exemption Phaseout

Filing Status Phaseout Begin Phaseout Complete
Single $ 258,250.00 $ 380,750.00
Married Filing Jointly $ 309,900.00 $ 432,400.00
Head of Household $ 284,050.00 $ 406,550.00

Source: Author’s calculations.

Alternative Minimum Tax

Since its creation in the 1960s, the Alternative Minimum Tax (AMT) has not been adjusted for inflation. Thus, Congress was forced to “patch” the AMT by raising the exemption amount to prevent middle class taxpayers from being hit by the tax as a result of inflation.

On January 2, 2013, the American Taxpayer Relief Act of 2012 indexed the income thresholds to inflation, preventing the necessity for an annual patch.

The AMT exemption amount for 2015 is $53,600 for singles and $83,400 for married couple filing jointly (Table 5).

Table 5. 2015 Alternative Minimum Tax Exemptions

Filing Status Exemption Amount
Single $ 53,600.00
Married Filing Jointly $ 83,400.00
Married Filing Separately $ 41,700.00