2008 Tax Rates

Income Tax Brackets

The 2008 income brackets are as follows:

Single	Married- Jointly	Head of Household	Rate
$1 – 8,025	$1 – 16,050	$1 – 11,450	10%
$8,026 - 32,550	$16,051 - 65,100	$11,451 - 43,650	15%
32,551- 78,850	65,101- 131,450	43,651- 112,650	25%
78,851- 164,550	131,451- 200,300	112,651- 182,400	28%
164,551- 357,700	200,301- 357,700	182,401- 357,700	33%
Over 357,700	Over 357,700	Over 357,700	35%

 

2008 Exemptions
and Deductions

Personal Exemptions
The personal exemption for each qualifying dependent increased by $100 for 2008.

	2008	2007
Exemption	$3,500	$3,400

	2008 Phase Out
Single	$159,950
Married Filing Separately	$119,975
Married Filing Jointly	$239,950
Head of Household	$199,950

Estate Tax Exclusion

An estate tax return for a U.S. citizen or resident needs to be filed only if the gross estate exceeds the applicable exclusion amount, listed below.

Applicable Exclusion Amounts
Year	Exclusion Amount
2006, 2007, and 2008	$2,000,000
2009	$3,500,000

Annual Exclusion for Gifts for 2008
A taxpayer can give $12,000 per person to any number of recipients in a calendar year without paying federal estate and gift tax. An unlimited amount can be given each year as long as no recipient receives more than $12,000. Gifts that qualify for this annual exclusion are never taxed-no gift tax is owed when the gift is made, and the gift is not taxed at death.

Standard Deductions

Standard Deductions for those who do not itemized are as follows:

	2008	2007
Single	$5,450	$5,350
Married Filing Separately	$5,450	$5,350
Married Filing Jointly	$10,900	$10,700
Head of Household	$8,000	$7,850

If 65 or over and/or blind add:	2008	2007
Single/ Head of Household	$1,350	$1,300
Married/ Surviving Spouse	$1,050	$1,050

Itemized Deduction Phase Out

Deductions are reduced by 3% of every dollar of Adjusted Gross Income (AGI) over $159,950 ($79,975 if married filing separately) up to a maximum phaseout of 80% of your itemized deductions. Your medical expenses, investment interest, casualty losses and gambling losses are excluded.
2008 Alert: This phaseout amount is now reduced by 2/3 in 2008.

Standard Mileage Rates

	2008 1/1-6/30 Rate per Mile	2008 7/1-12/31 Rate per Mile
Business Travel	50.5¢	58.5¢
Charitable Work	14¢	14¢
Medical	19¢	27¢
Moving	19¢	27¢

Social Security Tax Rates

•  The maximum wages subject to Social Security Tax (6.2%) increases to $102,000 in 2008 making the maximum tax payable $6,324. The Medicare tax rate is 1.45%. There are no limitations to this tax.  The FICA tax rate is the combination of these two taxes.

Self-Employed Health Insurance

•  Self-employed individuals are able to deduct 100% of their health insurance premiums.

You can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. However, you cannot deduct any insurance costs for any months you were eligible to participate in a group health insurance plan through your or your spouse's employer.

College Expense Deduction

You can take a deduction for qualified education expenses of up to $4,000 in the years 2006 and 2007, if your adjusted gross income for the year is $65,000 or less if you're single, or $130,000 or less if you're married and file a joint return. You can take a deduction of up to $2,000 in the years 2006 and 2007, if your adjusted gross income for the year is $80,000 or less if you're single, or $160,000 or less if you're married and file a joint return. If you're married and file separately, you can't take the deduction; you and your spouse must file a joint return to qualify for the deduction. You also have to be a U.S. citizen or resident alien to be eligible for the deduction; nonresident aliens don't qualify. You're also not entitled to the deduction if you are claimed as a dependent on someone else's return. If you take the deduction, you must include the name and Social Security number of the student the expenses were paid for.

 

Student Loan
Interest Deduction

Deductible interest payments are not limited to only the first 60 months of payments and the adjusted gross income phase out ranges are $115,000 to $145,000 for joint filers and $55,000 to $70,000 for single filers.  The maximum eligible expense is $2,500.

 

Long-Term Care Insurance

Given the high cost of nursing home and assisted living care for the elderly, many individuals are purchasing long-term care insurance in case they are one of the approximate 11% of Americans who enter a long-term care facility. This type of insurance may be a deductible medical expense (if total medical expenses are over 7.5% of your income) and may be purchased to cover a variety of levels of care, ($50.00/day, $100.00/day, $150.00/day, etc.). The daily coverage amount, the waiting period before benefits begin and your age at the time of purchase impact the cost of the policy. The IRS allows the deductibility of these insurance premium payments in 2008, but only to certain limits.

	Amount Deductible
71 and older	$3,850
61 to 70	$3,080
51 to 60	$1,150
41 to 50	$580
40 and under	$310

 

Business Benefits

Deducting Bonus Depreciation
For businesses in 2008, there is a 50% first-year bonus depreciation deduction.  Under this new first-year bonus depreciation provision, your business can immediately deduct half of the cost of a qualifying new asset if it is purchased and placed in service during calendar 2008.

Hint:  An asset eligible for the 50% first-year bonus depreciation must be new (not used) and placed in use after December 31, 2007

Section 179
Once again in 2008 businesses may elect to expense the purchase of qualified assets versus using depreciation.  This Section 179 election may be made for up to $250,000 in purchases.  Some limitations apply.