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Federal Tax Brackets 2009

Published 4/22/09 (Modified 6/17/11)
By MoneyBlueBook

Federal Tax Brackets 2009

Update: Projected Have Been Released!

The following represents the Internal Revenue Service (IRS)'s officially released 2009 federal income tax brackets. Read 'em and weep - or perhaps rejoice, depending on where you stand on the whole federal income tax bracket sliding scale. Regardless, you're going to be getting close and personal with the marginal rates when you file your 2009 tax return in early 2010. Let's have a look at some of the tax changes shall we?

Official IRS Tax Rate Schedule Updates For Tax Year 2009

Via the Wall Street Journal, the following graphical table below gives you the official marginal tax brackets for married couples filing jointly as well as the marginal rates for single filers for 2009. The previous year's numbers are also provided to give you an idea of some of the more noticeable changes since 2008. The income numbers listed in the chart below are taxable incomes, and thus they have taken into consideration all available personal exemptions as well as any of either the standard or itemized deductions, including all pre-tax above the line 401k and deductible IRA contributions.

As key portions of the marginal tax tables are pegged to inflation, quite a few numbers must be annually revised. Thus you will note that there are quite a few key changes for the 2009 tax year compared to the year prior. However, while overall tax numbers appear to have nominally increased on the whole, taking into consideration the effects of inflation, effective tax rates may actually have remained level or even dipped a bit.

Despite the text below that says "projected", the official IRS numbers have been released and they now represent official federal income tax rate brackets, locked in for 2009.

To summarize, here is a run through of some of the more notable tax rate changes for 2009 and even a quick blurb about some of the key tax benefits that did not change based on official IRS releases thus far:

  • Personal Exemption and Exemption For Dependents - Increased to $3,650 from $3,500 (up $150) from 2008, but is phased out at higher income levels.
  • Standard Deduction - The great majority of American taxpayers take the standard deduction rather than itemizing deductions for expenditures such as mortgage interest, charitable contributions, and state & local taxes. The standard deduction increased to $11,400 from $10,900 (up $500) for married couples filing a joint tax return, increased to $5,700 from $5,450 (up $250) for singles and married individuals filing separately, and increased to $8,350 from $8,000 (up $350) for heads of household.
  • Overall Tax Bracket Thresholds - Increased across the board for all tax filing statuses. This means that if your annual income did not increase since last year or if you did not receive an inflation based pay raise, you may likely pay a little less in taxes in 2009 than in 2008. As the IRS notes as an example on one of its press releases, in regards to a married couple filing a joint return, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $67,900, up from $65,100 compared to tax year 2008.
  • Earned Income Tax Credit - Increased to $5,028 from $4,824 (up $204) for low and moderate income workers and working families with two or more children. The income qualification limit to take the earned income tax credit (EITC) for joint return filers with two or more children also increased to $43,415 from $41,646 (up $1,769).
  • Annual Gift Tax Exclusion Amount - Increased to $13,000 from $12,000 in 2008 (up $1,000). Often overlooked by people, the gift tax requires the gift giver to pay a special tax on the gift amount if it exceeds a certain amount per year. For 2009, that threshold will be bumped to $13,000.
  • Social Security Contribution and Wage Benefit Base - Increased to $106,800 from $102,000 (up $4,800). This means that 2009 income sources over $106,8000 will not be subject to Social Security taxation. With the Social Security tax rate at 6.20%, this also means that the maximum a person will shoulder in Social Security taxes for 2009 is $6,622.
  • Traditional and Roth IRA Contribution Limits - No change from 2008. Despite inflationary pressures that increased tax bracket rates across the boards, sadly, IRA and Roth IRA contribution limits will be staying the same - stuck at a crappy and paltry $5,000 per year for those under age 50, and $6,000 per year for those 50 or above.
  • Roth IRA Contribution Limits (Income Threshold) - Increased to $166,000 from $159,000 (up $7,000) for married filing jointly couples, and increased to $105,000 from $101,000 (up $4,000) for singles and others.

Watch Out For Possible Upcoming 2010 Tax Bracket and Tax Rate Changes

While official IRS federal income tax brackets are not usually released for the following tax year until the late fall, it's frankly never too soon to get your hands on the earliest reliable marginal tax bracket predictions. Year after year, a group of private tax experts and economists associated with the Wall Street Journal get together and crunch officially released inflationary data to provide news readers an early bird peak at the following year's projected income tax brackets. This group, comprised of members from the Tax and Accounting arm of Thomson Reuters, tax analysts from CCH, and an accounting professor from Northern Illinois University - usually releases their annual tax bracket projections and estimations on tax deduction numbers for the following year during early fall (around September), well before the official IRS numbers are issued.

As marginal tax brackets track changes in inflation and other economic data fairly closely, the annual tax rate estimations by the Wall Street tax team members have yielded pretty reliable and on par results over the years. If you're antsy to get a head start on tax year 2010, stayed tuned in very early Fall 2009 for the newest updates on the 2010 projected federal income tax brackets.

Because of the election of Barack Obama as the new President of the United States and the handover of the country to a new political party, there are bound to be substantial changes in the tax code and income tax rates in the coming years. Working on an economic stimulus plan and advocating aggressive social agendas, President Obama has already proposed numerous changes to the ordinary income tax rates, such as raising the top rate from 35% to 39.6% - potentially boosting the tax burdens of higher income earners to new heights. He has also suggested the need to reduce tax deductions for American households earning more than $250,000 annually, and has also made proposals to increase taxes on capital gains and stock dividends. With a political and taxation platform that is decidedly against those those in the higher upper echelons of the U.S. tax code, those who have done well for themselves over the years seemingly have a lot to fear in Mr. Obama. Personally, while I feel Obama is doing a commendable job on the social and foreign policy front, I hope he doesn't get too carried away with his taxation ambitions. His remarks on taxes always make me nervous.

In the mean time, many of us regular taxpayers can only just ride along and hope for the best. Regardless of what Obama ultimately decides to do and no matter how federal income tax brackets eventually look like in 2010 and 2011, we should try to wisely structure our actions today to reduce our future tax burdens as much as possible, regardless of what happens. Such smart tax moves would include taking advantage of employer sponsored pre-tax perks like flexible spending accounts (FSA), and investing���� in tax deferred retirement vehicles like 401(k)'s and Roth IRA accounts.

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138 Responses to “Tax Brackets 2009 | Federal Tax Brackets 2009 | Money Blue Book” 

  1. Steve says:

    Eyeless1, hear hear!

    And I AM a boomer myself.

  2. dick says:

    I've lived and worked in three western democracies, I and most people in the other two western democracies had no problem paying our fair share of taxes for the services that the state provided. The other two had universal healthcare so people didn't have to pay taxes in the form of insurance premiums, deductibles, copays and were never denied coverage. But that's another story.

    Most people in America, although a smaller percentage than elsewhere, expect to pay for their services and the privilege of living in a western democracy too, What's different here is that there is a very noisy and well-funded continuous campaign that aims to further enrich the already wealthy at the expense of the vast majority of working Americans. The Bush administration put this program on steroids and we all know what that led to. Economic meltdown for the many, vast wealth increases for the few.

  3. Franz Kelly says:

    It is obvious that President Obama lacks the practical life experiences that fuel common sense decisions. If you go in dept. you go backwards, If you invest in non product producing entities they return nothing. How about investing in Doctors, Scientists and Engineers for the future. How about Tort reform, the lawyers produce nothing except grief. Why aren't the same laws applicable to Government employees and Politicians that we are expected to abide by. Our elders are turning in their graves. Support the people who produce like the rest of the industrialize countries, Help those who need help not those who want help

  4. Carla says:

    There are alot of people who are using the system out there to make their income tax smaller. I had an employee tell me once that she was going to "divorce" her husband to try to collect on food stamps/Medicaid for her 4 children etc. She was still going to live with him but not be married. He was an illegal so he was off the grid anyway working construction jobs. This is what the American taxpayer is working for....people who decide to take advantage of the system here for their benefit. They have children they can't afford to have someone else pay for them (health benefits, food stamps, HeadStart etc). I told my employee that I would fire her if I knew she did this. Needless to say, she quit a month later. I know this is what she is doing.

    The problem with this country is that we feel bad for everyone...the compassion is endless. Persons from other countries have children born here in order to receive benefits that they can't get in their own countries. Do you blame them? Why would you become a citizen of this country and pay income taxes (or not)? You can still get healthcare via our emergency rooms, you can still send your kids to American schools and you don't have to pay the IRS. NO AUDITS FOR YOU. ONLY FOLKS WITH SOCIAL SECURITY NUMBERS GET AUDITED.

  5. Ron says:

    I am enjoying the debate going on here. Far better than most drivel I read on blog posts and there seems to be a minimum of silly "haters" spouting nonsense. However, talking about federal income tax rates exclusively is a bit short-sited. I live in Ohio, I pay 25% to the feds, 5.75% to the state, 1% to my municipality, and .75% to my school district. Combined, that is a 32.50% tax rate on my income. However, this is deceiving too. Of course, I am leaving out social security and medicare. Once these two are added, nearly 50% of my income is taken by the government before I ever see a dime. Like most of society, I see the need for taxes. We live in a civilization that requires upkeep and that costs $$$$. But I am bit tired of our comparisons to third world countries (I have spent much time in 15 of these countries including Vietnam, Cambodia and Peru over the past 20 years) and how much better we have it here. The comparison is erronious--apples and oranges folks. We should be compared to other countries SIMILAR to ourselves, e.g., Germany, Japan, Canada, etc. What you find (excepting Japan) in these cases are similar rates of taxation, with variances of the method of taxation of course, but with far better services and standards of living than we have here. When a country like Sweden, for example, pays 50% of their income, they get superb roads, stellar schools, great medical care, efficient public transit, and a social welfare system that takes care of its indigent, mentally ill, and homeless. We (the US) get ill-advised and poorly planned wars, pot-holed roads, embarrassing public schools, no public health care unless you're on medicaid or medicare, almost non-existent public transit, and a inefficient and ineffective welfare system that largely ignores the groups listed above. The issue is not taxation per se. The real issue is that we pay too much for too little.

  6. Mike says:

    Rich people pay more taxes cuz they beifit more from the exsistance of society. Also is your tax bracket 35%, yes, but do you really pay that? no, the rich have the means to hire professionals to give them all the tricks of the trade to pay less and hide some more... If the govenment lowerd the highest tax bracket from 35% to 20% would everyone all in a sudden say "wow thats so much more far, I will stop hiding money in my off shore tax haven"... no they wouldnt. They would do the same thing thier doing now and keep the difference. The whole write off, loopholes, exemptions need to be overhauled. Then you can start talking about a more fair bracket system.

  7. Capitalist Number One says:

    Listen up... This country is headed for socialism. All the crybabies asking for handouts should get a life. This country is a capitalist country. Go out and better yourself and make plenty of money so you can pay high tax rates. Don't expect my tax dollars to fund your life style because you are lazy and want to use foodstamps and sit on the bed watching oprah. Go betetr yourself, use opportinities and hard work to get ahead. Don't blame the "rich" for your problems. Do you think all the rich became rich because of a silver spoon in their mouth? Go work 15 hour days, grind it out and make something of yourself

  8. Anna says:

    Ok. So this is just based on my experience. I started my career making $300 a week, which today would be considered poverty level. This was not that long ago. I worked hard, put myself through school, spent 12-15 hrs 6 days a week getting better at what I do and I have been blessed with promotions that now allow me to make a substantial amount of money. Please don't state that it is "fair" to keep raising the tax on rich people. I will NEVER be against paying taxes to help those who literally cannot work, however, it makes me irate to drive by and see the 'porch sitters' sitting around waiting for their government check to come in the mail so they can continue to sit. I came from nothing and made something. Someone's background is not an excuse in my book. Also, I am not mad at the "sitters" themselves, however I am angry that our government has ALLOWED them to do this!! I LOVE AMERICA! Let me say that again, I LOVE AMERICA, however, our system is severely broken. I don't care if the country is democratic or republican run, it needs to be fixed. And to all those sitters who could work if they chose, shame on you.

  9. phil pauley says:

    NOBODY SEEMS TO UNDERSTAND TAX BRACKETS!!! YOU DO NOT PAY THE "MARGINAL" TAX RATE ON YOUR "LAST DOLLAR"!!! I WILL PLOT A SIMPLE % TAX VERSUS INCOME SO YOU CAN UNDERSTAND IF YOU REALLY WANT TO KNOW!!!!

  10. Kevin says:

    Phil,

    You are sadly mistaken. You in fact DO pay your highest marginal tax rate on your last dollar earned. The graph you propose would indeed show a lower rate because you are talking about the average tax rate on total income, not on marginal income. If you've ever taken math before...there would be an asymptote at the highest marginal tax rate as your income goes to infinity.

  11. phil pauley says:

    KEVIN ---THE "LAST DOLLAR PARADOX" CAN BE EXPLAINED BY LOOKING AT THE IRS TAX TABLES. FOR EXAMPLE, WITH A TAXABLE INCOME OF $78,850,THE MAXIMUM INCOME IN THE SO~CALLED "25% BRACKET", A SINGLE PAYER'S TAX IS $16,063/ 20.37%!!! YOUR "LAST DOLLAR" IS ONLY 20+% AT THIS INCOME LEVEL!!! MANY "EXPERTS" MAKE INCORRECT EXPLANATIONS OF THE "LAST DOLLAR" TAX DUE TO THE ODD METHOD USED TO DEFINE THE PROGRESSIVE TAXATION RATE/ A SIMPLE STEPPED,STRAIGHT~LINE GRAPH WOULD BE EASIER FOR MOST TAXPAYERS ( AND EXPERTS ) TO UNDERSTAND!!!

  12. Kevin says:

    Phil,

    While I think we understand each other, let me carry your argument to an extreme to illustrate its failure and that there is no paradox. Lets say, you have a graduated tax system similar to the IRS, but tax rates of 15% on first 25k of income, 50% on next 25k, and 100% on any remainder of income. So, with your line of thinking, the person that earns exactly 50k in taxable income has a 16.25k tax liability for only a 32.5% average tax rate. Now, lets say an ingnorant person with no knowledge of the tax code, earns 60k in taxable income, his tax liability is now 42.5k for an average tax rate of 70.8%. Now, was this person's last dollar taxed at 70.8% or 100%? This person has no incentive to earn any income beyond 50k because of the punitive marginal rate. THIS MUST BE UNDERSTOOD BY EVERYONE. EVENTUALLY GOVERNMENTS WILL TAX THE INCENTIVES OF PRIVATE SECTOR PRODUCTION OUT OF THE SYSTEM. A GOVERNMENT'S VERY LIFEBLOOD IS PRIVATE PRODUCTION. SIMILAR TO A CANCER THAT EVENTUALLY KILLS ITS HOST, TAXATION IS THE CANCER THAT KILLS THE HOST OF PRIVATE ENTERPRISE.(sorry about the CAPS) Those people clammoring for tax the rich at punitive rates don't understand economics and what drives investment and job creation. I had to laugh at the reaction to the elections the other day as I heard over and over on the media that government "must do something about the jobs situation". That people have connected governement policy to job creation truly shows how poor our education system is and how far we need to go as a country.

  13. Steve says:

    What a great thread this has evolved into. Seriously!

    Phil, there is no "paradox." You are confusing the effects of a stepped bracket distributed across the total taxable income amount with a "sliding scale" system, basically. Every dollar beyond the set maximum bracket limits IS most assuredly being taxed directly at the next higher bracket rate. You are doing nothing more than averaging the final total tax bill across the entire total of taxable income. I could argue that every additional dollar taxed at the highest marginal tax rate applicable also increases the tax rate for the first dollar taxed. Because it does!

    Semantics.

  14. Steve says:

    So Kevin, let me make sure I understand your last post.

    On the one hand, you say punitive taxation by the government will stifle job creation. On the other hand, you ridicule those who say government policy can have any effect on job creation.

    So....which is it?

  15. Kevin says:

    Steve,

    Good question, its both! I don't belive they are mutually exclusive. I understand where I might have confused you and not been so clear, however, I believe they are congruent thoughts. Let me try to explain. Government policy most assuredly does have an effect on willingness/ability for the private sector to create jobs, but ask yourself, does it maximize job creation? And in that vein, punitive taxation only serves to further minimize job creation from an already non-maximum starting point. I argue that government policy only affects job creation to the extent that the private sector can overcome the hurdles placed in front of it by government. And actual government jobs are paid through taxation, and by definition, are sub-maximum to a free-market solution.

  16. phil pauley says:

    KEVIN, YOU ARE INDEED CORRECT; EVERY TAXABLE DOLLAR IN A PARTICULAR "TAX BRACKET" IS TAXED AT THE BRACKET'S "MARGINAL RATE"!!! THE POINT I WAS TRYING TO MAKE IS THAT MOST TAXPAYERS BELIEVE THAT THEIR MARGINAL TAX RATE IS THEIR ACTUAL RATE OF TAXATION. IN REALITY,THEIR ACTUAL EFFECTIVE TAX RATE VARIES FROM A MINIMUM OF ABOUT 14% AT THE LOWER END OF THE "25% BRACKET" TO A LITTLE OVER 20% AT THE HIGH END FOR A SINGLE 2008 TAXPAYER. WIKIPEDIA'S "INCOME TAX IN THE U.S." WEB SITE HAS A FAIRLY NICE GRAPH THAT SHOWS ACTUAL (EFFECTIVE) TAX RATES... (IT SHOULD BE NOTED THAT THE ACTUAL TAX RATES ARE VARIABLE & ARE ALWAYS LESS THAN THE "MARGINAL TAX RATES" !!!

  17. Steve says:

    OK, Kevin. Here's the deal. Your post in reply clears some things up, but in your original post you definitively stated "That people have connected government policy to job creation truly shows how poor our education system is and how far we need to go as a country." You changed the argument in your reply when you said "Ask yourself, does it maximize job creation?"

    Additionally, you railed on "punitive tax rates" killing private sector job creation. Obviously, tax rates are a direct function of government policy/law.

    I perceive a few issues in both assertions.

    I can easily connect government policy to job creation, in many, many ways, both positively and negatively (obviously, a negative influence on job creation implies stifling or even destruction of jobs). In fact, you yourself tried to do the latter with your statements about "punitive" tax rates.

    First, please define what constitutes "punitive tax rates." Is this a little bit like defining what is "obscene," i.e., you may not be able to define it, but you know it when you see it? It's easy to throw pejorative words around in the context of espousing your views, but it's a little more difficult to be specific, no?

    Second, as far as the influences of government policy on creation of jobs, how many examples do you want to see? Macro governmental policy has historically had HUGE impacts on job creation (or destruction). I won't even address the New Deal...too obvious. But what about America's decisions to enter (or start) any armed conflict, rightly or wrongly? Look at WWII, or Viet Nam, or Iraq for examples of the impacts on the GDP and hence the underlying industries that support the war efforts.

    Government spending on infrastructure, from the local all the way up to the federal levels, has tremendous impacts on employment levels in associated industries. I know this to be fact, as I am an engineer engaged in the design of public infrastructure elements at virtually all levels. It may take awhile on the national level, but I can tell you without a doubt that aggressive local infrastructure investment by our local government and a major local state University have kept my company in business over the last couple of years, and has provided work for contractors throughout our area, while addressing significant public needs in the process.

    Government can impact trends in employment through legislation addressing energy policy. If you have not seen what's happening in the panhandle of Texas, down through the Sweetwater area into the northwestern fringes of the Hill Country, then you have not seen a very clear marker.

    There are so many examples, it boggles the mind that anyone would not be able to connect government policy to potential job creation (and yes, even job destruction).

    But to say the government has no effect is simply not factual in any sense.

  18. Kevin says:

    Steve,

    Obviously, a very complex issue and I accept your points and beg your pardon for not being more specific and careful about my statements. I am thinking of the question in terms of government policy relative to a free market policy. I want someone to prove to me that government investment is equal to or better than what a free market delivers.

    Lets say a government opens a new park. Everybody says what a great thing to do! Now, the park has been open 5 years and been lightly attended and has been running at an operating loss every year. A politician will come to his/her constituency and say what a great thing we have here, we need to raise taxes to cover this loss i.e. government is largely, not totally, impervious to market signals. Now, contrast that with a free-marketeer who opens a shop and is suffering losses. The market is sending a message to that owner that his wares are undesirable. He cannot go and raise taxes, instead he must make changes or be out of business which would free up the space for a more productive venture. I believe truly free markets, not the quasi-free markets we have today, will maximize employment and income relative to a government deciding where to invest capital.

    Please think of taxation as a redistribution of wealth, because that is exactly what it is. So, in a sense, any tax is a "punitive" tax that forces private investors to seek a higher rate of return than they otherwise would. Since governments don't earn their revenue, they cannot possibly "invest" this money better than the private sector (I already know you will try to debunk that statement). Governments can and will distort markets beyond any semblance of a free market, just look at our most recent sub prime debacle and the tax-advantaged status real estate has held for many decades. Just a warning to beware of politicians saying "look what the free market has done", when in fact the government policies of Fannie Mae and Freddie Mac are largely to blame for the distortions in that market. Lots of other blame to go around there too as I'm sure you are aware.

    I ask you to relate the AIG bonus /Exxon windfall profits situations to your company, where the government wanted to confiscate bonuses/earnings because they deemed them too high. What's to keep the government from saying to you "hey, I've helped you stay in business and I think your profits are too high given you are doing a public service". Sounds far fetched, but it is a thin line from AIG/Exxon to the small businessman. Governments do crazy things in a crisis, all in the name of the "public good" of course.

  19. Shannon says:

    You know, this really ticks me off. The author's liberal, elitist attitude in all his praise for Obama (and condescension for anyone with a different opinion) disgusts me. The bottom line? I am taking home LESS in my paycheck and I am not in either of the top two brackets. We've been had by the likes of this author and Obama's empty promises.

  20. Raymond says:

    Err... Shannon how am I elitist or condescending? Please elaborate as I'm curious as to the precise words I used to suggest that.

    I actually voted for John McCain in the last election due to my opposition of Barack Obama's pro-tax agenda. However, I respect the man for his stubbornness in supporting unfavorable tax policies to bolster his promotion of social programs that he honestly believes is in the best interest of the American people. Respect doesn't necessarily mean I agree or support.

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