A sneak peek at 2008 tax savings

Other inflation adjustments

In addition to the tax brackets and personal exemption and standard deduction amounts, several other sections of the tax code are adjusted for inflation. Here are numbers that will apply for 2008 tax returns:

• Extra standard deduction for taxpayers 65 and older. Married taxpayers age 65 and older will be allowed to add $1,050 to the regular standard deduction (the same as on 2007 returns), and singles will get an additional $1,350 (up from $1,300 in '07).

• Kiddie-tax trigger. The amount of investment income a child under age 19 -- or a full-time student under 24 -- can earn before excess earnings are taxed at his or her parents' rate will rise to $1,800 for 2008, up $100 from 2007.

• Itemized deduction phaseout. Taxpayers will begin to lose the value of their itemized deductions after taxable income passes $159,950 in 2007; that's $3,550 higher than the $156,400 trigger point for 2007.

• Personal exemption phaseout. The income levels at which the value of personal exemptions begin to disappear will also rise in 2008. For single taxpayers, the trigger point will be $159,950 (up from $156,400 in 2006); for married couples, $239,950 (up from $234,600); and for heads of households, $199,950 (up from $195,500). The rising trigger points save money for taxpayer with incomes above these levels.

• Tax-free parking and transit passes. Employers will be allowed to give employees parking valued at $220 a month as a tax-free fringe benefit in 2008. The 2007 maximum is $215 a month. The tax-free limit for transit passes will rise from $110 to $115 a month.

• Social Security wage base. This amount, after which the 6.2% Social Security tax no longer applies, is not affected by the inflation number released by the government in September. It does rise each year, however, based on average wage data that won't be announced until later in the year. Kiplinger estimates that the wage base will break six figures in 2008, rising from $97,500 this year to around $102,000 in 2008.

2008 tax tables

Following are the 2008 tax brackets, based on the inflation adjustments:

Singles

2008 taxable income	Tax
$8,025	10% of taxable income
$8,026 to $32,550	$803 plus 15% of excess over $8,025
$32,551 to $78,850	$4,481 plus 25% of excess over $32,550
$78,851 to $164,550	$16,056 plus 28% of excess over $78,850
$164,551 to $357,700	$40,052 plus 33% of excess over $164,550
More than $357,700	$103,792 plus 35% of excess over $357,700

Married couples filing jointly

2008 taxable income	Tax
$16,050	10% of taxable income
$16,051 to $65,150	$1,605 plus 15% of excess over $16,050
$65,151 to $131,450	$8,970 plus 25% of excess over $65,150
$131,451 to $200,300	$25,545 plus 28% of excess over $131,450
$200,301 to $357,700	$44,823 plus 33% of excess over $200,300
More than $357,700	$96,765 plus 35% of excess over $357,700

Heads of household 

2008 taxable income	Tax
$11,450	10% of taxable income
$11,451 to $43,650	$1,145 plus 15% of excess over $11,450
$43,651 to $112,650	$5,975 plus 25% of excess over $43,650
$112,651 to $182,400	$23,225 plus 28% of excess over $112,650
$182,400 to $357,700	$42,755 plus 33% of excess over $182,400
More than $357,700	$100,604 plus 35% of excess over $357,700

This article was reported and written by Kevin McCormally for Kiplinger's Personal Finance Magazine.

Published Sept. 28, 2007

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