After years of raising taxes each year without appearing to--thanks to inflation--Congress during the 1980s finally began indexing brackets, personal exemptions and the like so that your taxes won't go up simply because inflation drove your income up.

Though this system is far from perfect, and includes rounding wrinkles that can cause some factors to go un-indexed for several years, it does impart an element of fairness that was long missing from the tax code.

Over the years, more and more elements of taxation have been indexed. Now the Internal Revenue Service has to do nearly 100 different computations each year to bring the tax tables, deductions, exemptions and exclusions up to date.

The inflation adjustments are based on movements in the consumer price index from September through the following August. This is ample time for the IRS to make its computations and get the results into its forms and publications by the end of the calendar year.

Unfortunately, the tax agency usually doesn't release its new thresholds until December, so taxpayers who want to use them for planning are often past the point where they can do much about shifting income or deductions to take advantage of changes that will occur in the following year.

The numbers upon which the IRS bases its calculations are public, however, so it's possible for others to do the math themselves. One firm that has done that is CCH Inc.

The Riverwoods, Ill., publisher of tax, legal, securities and other business information cautions that its numbers for the year 2000 are merely projections and could vary from the official numbers. Even if they are not identical to the IRS's, however, they should be close enough to be useful in planning.

Inflation has been fairly tame recently, so the changes from last year are not dramatic.

For example, a married couple filing jointly will likely remain in the 15 percent bracket next year until their taxable income exceeds $43,850. This year such a couple passes into the 28 percent bracket at a taxable income of $43,050. The standard deduction for a married couple filing jointly is expected to rise $150, to $7,350, next year, while the personal exemption is expected to climb $50, to $2,750.

But even small changes add up over time. The standard deduction for a married couple was just $5,000 in 1988, CCH said.

The adjustments also affect the phase-out of personal exemptions and the restrictions on itemized deductions that are imposed on upper-income filers.

The restriction on itemized deductions for married couples kicks in at an adjusted gross income of $128,950, up from $126,600 for 1999 returns, according to CCH's figures. This restriction requires that itemized deductions be reduced by 3 percent of the amount by which income exceeds this threshold.

Personal exemptions begin to phase out at $189,950 for a couple this year. For next year, CCH figures that threshold at $193,400.

But some limits won't change at all, even though inflation is not zero.

For example, currently any individual can give any other individual up to $10,000 without incurring gift tax. Congress indexed that limit in 1997 but included the provision that the adjustments be made only in $1,000 increments. Inflation will have pushed the gift-tax exclusion to $10,354 next year, CCH said, but rounding brings it back to $10,000.

Looking Ahead at Tax Rates

Here are tax projections for 2000 from CCH Inc. (based on IRS numbers):

Married filing jointly (and surviving spouse)

Tax rate 1999 taxable income 2000 taxable income

15%$ 0 - $43,050 $0 - $43,850

28% $43,050 - $104,050 $43,850 - $105,950

31% $104,050 - $158,550 $105,950 - $161,450

36% $158,550 - $283,150 $161,450 - $288,350

39.6% Over $283,150 Over $288,350


15% $0 - $25,750 $0 - $26,250

28% $25,750 - $62,450 $26,250 - $63,550

31% $62,450 - $130,250 $63,550 - $132,600

36% $130,250 - $283,150 $132,600 - $288,350

39.6% Over $283,150 Over $288,350

Standard deductions

1999 2000 Increase

Married filing jointly

(and surviving spouse) $7,200 $7,350 $150

Married filing separately $3,600 $3,675 $75

Single $4,300 $4,400 $100

Head of household $6,350 $6,450 $100

Income level* at which 3 percent itemized deduction limit takes effect

1999 2000 Increase

Married filing jointly

(and surviving spouse) $126,600 $128,950 $2,350

Married filing separately $63,300 $64,475 $1,175

Single $126,600 $128,950 $2,350

Head of household $126,600 $128,950 $2,350

*Adjusted gross income