Historical Comparisons of Standard Deductions and Personal Exemptions

STANDARD DEDUCTIONS PERSONAL EXEMPTIONS Every year the IRS revises the dollar amounts for a variety of taxes, which affect virtually every taxpayer. This includes standard deductions VS. and personal exemptions. WHAT IS A STANDARD DEDUCTION? • According to the Internal Revenue Service, a standard deduction is the dollar amount that reduces the amount of income on which you are taxed. • The standard deduction is adjusted each year for inflation and varies according to a taxpayer's filing status. A LITTLE HISTORY 1900 1910 1920 1930 1940 1950 :1960 1970 1980 1990 2000 From 1944-1969, it was equal to 10 percent of adjusted gross income, up to a maximum of $1,000, Beginning in 1985, an additional standard deduction was given if you or your spouse are age 65 or older or blind at the end of the year. The standard deduction was first adopted in 1944. WHAT IS A PERSONAL EXEMPTION? • Personal exemptions directly reduce your taxable income. • As a taxpayer you are allowed a personal exemption for yourself, your spouse if married filing jointly, and each person you claim as a dependent. A LITTLE HISTORY 1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 The personal exemption amount in 1894 was $4,000 (over $80,000 in today's dollars). In 1895 the original personal exemption amount of $4,000 was declared unconstitutional. A HISTORICAL COMPARISON PERSONAL EXEMPTION $4,000 $3,000- $2,000 $1,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 STANDARD DEDUCTION $12,000 $11,000- Married Filing Jointly $10,000- $9,000 $8,000 Head of Household $7,000 $6,000- $5,000 .---..... .…..... ***- Single/Married Filing Separately $4,000- $3,000- $2,000 $1,000- 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 For tax year 2012, personal exemptions and standard deductions will continue to rise and tax brackets will continue to widen due to inflation. 2012 SOURCES: IRS.GOV, 2011 | TAXPOLICYCENTER.ORG, 2011 TurboTax Choose Easy.