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. Daniel says:

    Ugh I hate paying taxes with a passion! After paying my 2008 taxes, I can't stand to even look at the new round of taxes for 2009. The Obama government's wasting our money on these useless bailout packages instead of sending us economic stimulus checks for consumers. When will it be our turn to get bail out? Those of us suffering and unemployed need help too!

  2. Raymond says:

    Daniel, allow me to share with you some of my thoughts about taxes and government. I was going to write a personal finance blog post about it...but I guess I can stick it here as a comment....

    By no means am I a federal income tax apologist, but while I abhor taxes as much as the next guy, I also understand the underlying reasons why we pay. Underneath the agony and frustration of having to fork over your hard earned money in the form of taxes to Uncle Sam, there is a blessing in disguise. We should all feel blessed and fortunate to have the opportunity to live in this great country, and the ability to work honestly, and pay one's due.

    Many of us Americans hate paying taxes with a passion, but as someone who has visited less developed third world countries before, I think we ought to be somewhat grateful that our taxes wind up going towards productive uses - the majority of the time. Those who live and work overseas, and pay taxes to a foreign government frequently never see any return from the taxes they pay in the form of improved law enforcement, better ambulatory care, better roads and bridges, or even social service benefits. Oftentimes, the money simply disappears into the back pockets of corrupted government officials. At least in the United States, despite our complaints, our tax money counts for something most of the time. Yes certainly there are occasions where tax funds are wasted and spent on crooked pork barrel projects, fruitless industry bailouts, and other useless endeavors, but much of the time, our taxes are used to help fund reliable societal infrastructures such as critical 911 emergency services, subsidized public education for our children, and improved national defense and security. Just one successful emergency response from 911 may be worth a lifetime's worth of taxes paid. Many of us who have not had the opportunity to experience the other realities in lesser parts of the world take many of these government provided social perks for granted.

    But as I discussed in a past post about tax evasion and tax avoidance, while it is our legal duty to pay accurately assessed taxes, it is also within our full right to utilize whatever legal means at our disposal to reduce our individual tax burdens as much as possible. Because "the only things certain in life are death and taxes", it's best for us to confront every year's tax burden with as much early strategic planning and foresight as possible...which is why I am so interested in early federal tax bracket projections...

  3. Saran says:

    Are these the official IRS 2009 federal income tax brackets or are these merely projected estimations? I know the IRS has officially released these numbers already, but is that it?

    Is there any chance that President Obama's upcoming legislations and economic proposals result in major tax bracket changes for the upcoming 2009 year...or are these tax bracket rates set in stone at this point? Can any tax experts out there help answer this question for me?

  4. Raymond says:

    Saran,

    The posted tax rates, income numbers, deductions, and federal tax brackets listed above all represent official IRS numbers. Any future changes in the U.S. tax code by Obama and friends will be reflected in future 2010 and 2010 tax brackets than the upcoming 2009 tax year. Besides, it would be patently unfair for the federal government to alter the tax code in mid year and not allow the American public the opportunity and sufficient fair warning to properly structure their tax life ahead of time to comport with tax regulation changes.

  5. Deanna says:

    Why didn't President Obama authorize an increase in the Roth IRA or the regular IRA contribution limits? Why do they even place a cap on these contributions. Why don't they increase the cap higher to something like $10,000 or even $20,000 a year....why limit the Roth contribution to a mere $5,000? I don't understand the government anymore. ~~Frustrated in Georgia

  6. DebtGoal says:

    A very good question I've always wondered about. At least for the debt-laden crowd, which I'm concerned with giving advice to, making the contributions while revolving credit card debt is one of the bad ideas.

  7. Raymond says:

    I have no idea why contributions limits for the Roth or IRA were not increased to comport with inflationary changes. But I suspect the government's trying to implement plans to stimulate greater consumer spending not promote greater retirement savings at the moment. Makes some sense I suppose - we are still in a global economic recession at the moment.

  8. Berkshire says:

    So it looks like the WSJ experts and tax projection pundit heads release their 2010 federal tax brackets in early Fall - early September 2009 perhaps?

    Any idea what Prez Obama plans to introduce into the new tax code for 2010 and 2011? His Robin Hood talks of robbing the rich and giving it to the poor frankly alarm me. I'm all up for helping the less fortunate, but not at the expense of destroying our capitalist system. What are we, the Soviet Union?

  9. Jenny says:

    Can someone help me out with a couple questions?

    1.) Obama is in one breath saying he is going to let the Bush tax cuts expire. I think he mentions the top 2 income brackets in this comment. THEN he says in the next breath that people who make under 250K will not see their taxes go up one cent. So what am I missing here? The top 2 income brackets are starting at 208K.

    2.) Next question??? When it says "taxable income", is that my gross or my adjusted total after my deductions?

    I'm trying to see how much I can make this year without being in the targeted group BUT I don't even know what it is since he is talking out of both sides of his mouth on this.

    Thanks!

  10. Steve says:

    "Taxable income" is ALWAYS the amount upon which your tax liability is calculated, i.e., AFTER your deductions and any credits are applied.

    Regarding Obama's tax plans, we have ALREADY seen a tax cut implemented for the majority of workers. In fact, those reductions were required to be implemented by employers in their employee tax withholdings by April 1 of this year. If you are an hourly or salaried employee making less than about $250,000 annually, you should have already seen a slight increase in your take home pay already, due entirely to that small tax cut.

    As far as Obama "talking out of both sides of his mouth on this," I suggest perhaps you are listening to some shaded information. Are you a Fox News devotee by any chance?

  11. Jenny says:

    Thanks Steve :)

    When you are talking about a tax cut, are you talking about that $8 a pay they were were talking about?

    Soooo, what does Obama mean when he says that for the top 2 brackets they will see the Bush Tax cuts expire? Wouldn't that include people making under 250k? The 2nd highest tax bracket begins at 208K. To me "raising taxes and letting tax cuts expire" are the same thing. I am going to be bring home less. What am I missing here?

    And NO I am not a Fox devotee. I work 14 hr days. I have no time to watch any news. What is the problem with Fox? I hear Obama talk about them all the time. They seem to be feared for some reason. Very Odd.

    Thanks

  12. Steve says:

    Hello, Jenny:

    Well, this discussion could obviously get fairly involved. And I wouldn't mind that at all, except that, like you, I work fairly hard for my living and time is limited!

    Last things first. I don't think anyone "fears" FOX News. I don't know why they would. Similarly, I don't know why anyone would be so concerned about "the liberal media" or MSNBC or CNN or Rush Limbaugh or any other entertainment or opinion or news outlet. I believe nowadays most all of them are all biased to one degree or another and it's only a matter of how much they show it. Jim Lehrer's news hour on PBS may be one of the few "clean" news shows left anywhere.

    Still, the light of day is the best thing for all these views. The more people talk, the more we can all see what they are really about, long-term. That's the beauty of freedom of speech.

    I think it's been made abundantly clear that Fox News has taken direction from elements of the Republican Party to provide "talking points" on Republican issues throughout their programming. For example, although all the anchors vehemently denied any interest in promoting the recent "Tea Party" protests, saying they were only "reporting the news," the fact is the whole thing was mentioned many, many times on their programming over the course of the last couple of days leading up to it. This was done with great anticipation and excitement, including many promotional ads on-air regarding all the on-the-spot coverage Fox was going to provide at various locations.

    Regarding Obama's statements about the top two tax brackets, I personally have not heard him say that. Since I haven't heard that myself, and therefore don't know the context, I will defer to your knowledge on that topic!

    Regarding the INITIAL tax cut, mine equated to around $30 every two weeks. All I can say is, I'm glad to have it, but I'd also be very happy to forego it if it would help reduce the annual federal deficit.

    Regarding letting a tax cut lapse being the same thing as a tax increase, I think our differences are bacisally semantic in nature on that topic.

    Let me just say I am a fiscal conservative, but with a social conscience. I have been a dues paying member of the Concord Coalition for decades now. You should visit their web site some time if you are interested in receiving unbiased, non-political information about the federal government's spending and its impacts on generational issues. Their web address is http://www.concordcoalition.org

    For now, Peace! And don't work TOO hard. I made the mistake of not allowing a proper balance in my own life for years. Be certain you know what you are chasing, and why.

    steve

  13. Elaine says:

    Prez Obama needs to cut taxes for everyone rather than picking and choosing. We need to all stop pointing fingers accusing each other of being communist, socialist, or whatever, and get down to the business of stimulating this economy. The best way is to lower taxes for low income, middle income, and small businesses so that they start hiring again. Low taxes should be lower taxes for everyone, not just a chosen slice of the population. No more games...let's get those federal tax brackets back down and keep them low.

    And no...I'm not a Fox News devotee either, but I do enjoy their programming. MSNBC has a tendency to irk me. CNN is more moderately acceptable. But I guess television programming is inherently biased depending on who's running the show. The bias swings both ways.

  14. Steve says:

    Yes, the bias definitely swings both ways, as I said myself. Even you, Elaine, admit you prefer Fox over some of the others. Swap "Fox" for "MSNBC" in your own sentence, and you'd be speaking for me. So we all have our biases. The key, as you mentioned, is to work through those differences for the overall good.

    I'm about as bi-partisan as it gets nowadays. I referenced Concord Coalition as being a favorite organization of mine. Visit them, and you will see what I mean. I'm a pragmatist. I want what works.

    One question, tho'. How did the tax cuts of the Bush presidency "stimulate" our way to MORE than doubling the national debt (from around $4.3-trillion when he and the Republicans took control, to over $10-trillion when they left)? In my opinion, tax cuts are over-rated, relatively speaking, as a means of stimulating the economy and spurring growth. Even in the most highly taxed regions of the developed world they have growth. Productivity, as an example, is a much stronger influence on growth than mere tax cuts.

    But wanting tax cuts is "easy." Everybody would like to keep more of what they earn, myself included. I just don't believe that's all there is to it.

  15. Jesse says:

    Taxes are great. They are the main contributions that are made the the US communist parties that actually run the show in Washington D.C.

  16. Richard says:

    Frankly I don't care who runs the show in Washington D.C. It can be the Democrats with President Barack Obama at the helm or the Republicans with (Insert one of: John McCain, Rush Limbaugh, Dick Cheney, or Michael Steele), or even the fledgling Communist party of the United States. It wouldn't really matter to me on a day to day level. What really matters to me and to most people is the amount of money that we get to keep in our pockets and how we are allowed to support and take care of our families. In this rough economy, we must get lower taxes. Either that, or some form of economic stimulus check payment (like the one we received in 2008 - only for a much larger amount).

    Lower federal taxes will stimulate this economy - I guarantee you. I don't want any more funny tax bracket shifting games by the administration and Congress. Lower taxes for all right now and do away with the pointless games.

  17. Steve says:

    Richard, we could argue about the impact of lower taxes. I don't believe anything is "guaranteed."

    However, in my opinion, this economy does not need more stimulus at this point. The ship is turning. Look at Treasury rates. The yield curve is beginning to steepen dramatically. The yield on the 10-year is up around 25% in the last month, while the 1-Year has remained relatively constant. New home sales volumes are stabilizing. New jobless claims are dropping. Durable goods orders are picking up. Inventories are falling.

    As for who's in charge, I don't much care, either, so long as the public good is being served. However, we have a continually exploding national debt. You know, the one that increased from around $4.2-trillion when George Bush and the Republicans took power in 2000 to over $10-trillion in early 2008....by far the most explosive growth in the national debt in our nation's history. This WILL lead to higher interest rates, competition for available capital, and potentially significant inflation.....a much more depressing prospect for the economy and your and my wallet over the long term than mere taxes. The annual deficits and the burgeoning national debt are this nation's next big problem, and we've got to address it. It will require comprehensive changes in entitlements, as well as prudent investments in cost-saving technologies.

    In my opinion, now is not the time to be cutting federal income taxes dramatically.

  18. Reeses says:

    So what do you guys think about the upcoming 2010 federal tax bracket projections in the fall? Do you think Obama and the Dems are going to keep tax rates as they are now or are they going to drop for us middle class types. Isn't he supposed to jack up the tax rates on the poor so that us ordinary little people can have a chance in this economy?

    I certainly hope so. The rich and privileged few have ruled this country under Bush for far too long. It's time they paid up!

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