The Bright Side of Inflation

The prices of our lives’ necessities continue to rise. Whether it’s a gallon of milk or a gallon of gas, we always seem to be spending more for less. If you’re like me and think that it doesn’t seem fair, use this blog to help you cope with the extra price in the store or at the pump.

By law, the dollar amounts for various tax provisions must be revised each year to keep pace with inflation. This means that the extra money you’re spending on goods and services now will lead to increased tax benefits on your upcoming tax return.

The chart below shows how inflation has affected personal exemptions and standard deductions from last year to 2011 and looking forward to 2012.

2010 2011 2012
(filed 2011) (filed 2012) (filed 2013)
Personal Exemption $ 3,650 $ 3,700 $ 3,800
Standard Deduction:
Married Filing Joint/Surviving Spouse 11,400 11,600 11,900
Single/Married Filing Separate 5,700 5,800 5,950
Head of Household 8,400 8,500 8,700

Other tax benefits attributed to inflation include increases in tax bracket thresholds for each filing status, increases in tax credit phase out limits, and increases in annual deductible amounts for Medical Savings Accounts.

While the numbers aren’t huge by any means, every little bit counts in today’s economy. Inflation is never good for the consumer, but hopefully thinking about some of the tax benefits makes you feel a little bit better about it.