2008 Tax Changes

Make sure you are up to date on these  important personal tax changes for 2008.

2008 inflation adjustments:

There are eleven inflation adjustments for 2008, we have listed the top three.

• The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007.
• The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $65,100, up from $63,700 in 2007.

The complete list  is here: http://www.irs.gov/newsroom/article/0,,id=174876,00.html

Itemized deductions:

If your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. For 2008, the amount is increased to $159,950 ($79,975 if married filing separately). Beginning in 2008, the amount by which these itemized deductions are reduced is only of the amount of the reduction that otherwise would have applied.

Health savings accounts (HSAs):

High deductible health plan (HDHP). For HSA purposes, the minimum annual deductible of an HDHP remains at $1,100 ($2,200 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,600 ($11,200 for family coverage).

Limit on contributions. The maximum HSA contribution increases to $2,900 ($5,800 for family coverage). The maximum additional contribution for individuals age 55 or older increases to $900.

Maximum tax rate on qualified dividends and captial gains is reduced:

For tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain (the excess of net long-term capital gain over net short-term capital loss) is reduced to 0%. The 15% maximum tax rate on qualified dividends and net capital gain has not changed.

Personal exemptions:

The amount you can deduct for each exemption has increased to $3,500 for 2008.

You lose part of the benefit of your exemptions if your AGI is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2008, the phaseout begins at

• $119,975 for married persons filing separately
• $159,950 for single individuals
• $199,950 for heads of household
• $239,950 for married persons filing jointly or qualifying widow(er)s.

Beginning in 2008, you can lose no more than 1/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $2,333.

Social Security and Medicare taxes:

The maximum amount of wages subject to the social security tax for 2008 is $102,000. There is no limit on the amount of wages subject to the Medicare tax.