indexing exemption for inflation. each year, the internal revenue service adjusts the value of an exemption based on inflation ( and rounded to the nearest $50.00). in a recent year, if the exemption was worth 3,100 and inflation was 4.7 percent, what would be the amount of the exemption for the upcoming tax year?
100% + 4.7% = 104.7% = 1.047.
Amt = 1.047*3100 = $3245.70.
To calculate the amount of the exemption for the upcoming tax year, we need to use the formula for adjusting for inflation:
Adjusted Exemption = Previous Exemption + (Previous Exemption * Inflation Rate)
First, let's calculate the amount of inflation adjustment:
Inflation Adjustment = Previous Exemption * Inflation Rate
= $3,100 * 0.047
= $145.70
Now let's find the adjusted exemption:
Adjusted Exemption = Previous Exemption + Inflation Adjustment
= $3,100 + $145.70
= $3,245.70
However, the value of the exemption is rounded to the nearest $50.00, so we need to round the adjusted exemption to the nearest $50.00:
Rounded Exemption = Round(Adjusted Exemption / $50.00) * $50.00
= Round($3,245.70 / $50.00) * $50.00
= Round(64.914) * $50.00
= 65 * $50.00
= $3,250.00
Therefore, the amount of the exemption for the upcoming tax year would be $3,250.00.