The United States Revenue Act of 1942, Pub. L. 753, Ch. 619, 56 Stat. 798 (Oct. 21, 1942), increased individual income tax rates, increased corporate tax rates (top rate rose from 31 % to 40 %), and reduced the personal exemption amount from $1,500 to $1,200 (married couples). The exemption amount for each dependent was reduced from $400 to $350.
A 5 % Victory tax on all individual incomes over $624 was created, with postwar credit.
The 35-60 % graduated rate schedule for excess profits tax was replaced with a flat 90 % rate.
The Act also created deductions for medical expenses.[1]
Section 121 of the Revenue Act of 1942 enacted section 23(a)(2) of the Internal Revenue Code of 1939. That provision, effective retroactively for tax years that began after December 31, 1938, allowed a deduction, for U.S. federal income tax purposes, for expenses incurred in investment activities (activities for the production of income), even if such activities are not conducted in connection with a trade or business.[2] The current version of section 23(a)(2) in section 212 of the Internal Revenue Code of 1986.
Corrected for inflation by CPI:
| 1942 dollars | 2005 dollars |
|---|---|
| $350 | $4,194 |
| $400 | $4,793 |
| $624 | $7,477 |
| $1,200 | $14,378 |
| $1,500 | $17,972 |
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