Adjustments for Inflation

The Internal Revenue Service today announced the standard deduction, personal exemption and earned income credit amounts that have been adjusted for inflation. These amounts will affect 1990 tax returns filed in 1991.

The Tax Reform Act of 1986 provides for these adjustments as a benefit for taxpayers so that inflation will not result in tax increases.

For 1990, the standard deduction amounts have increased to $5,450 for married individuals filing jointly and surviving spouses; $4,750 for heads of households; $3,250 for unmarried individuals and $2,725 for married individuals filing separately. The additional standard deduction amount for aged and blind taxpayers has increased to $650. This amount is $800 for individuals who are married and not surviving spouses.

The personal exemption for 1990 is $2,050. This is the first time the personal exemption has been adjusted under the Tax Reform Act of 1986.

The maximum earned income credit available in 1990 will be $953.40. The credit is equal to 14% of the first $6,810 of earned income. The credit will phase out at a rate of 10% of the adjusted gross income (or earned income, if greater) that exceeds $10,730. The credit will phase out completely at $20,264 of adjusted gross income or earned income.

Rev. Proc. 90-7, announcing the inflation adjusted rates and amounts will appear in Internal Revenue Bulletin No. 1990-3, dated January 16, 1990.

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