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Get A Head Start On Tax Planning For 2008 It's still a month until most of us will file our 2007 tax returns, but it's a good idea to keep in mind key tax changes that will affect our 2008 returns. Here are some of the highlights: Wider tax brackets: In one of the rare cases in life where inflation looks like a good thing, all tax-bracket thresholds will be increasing. 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. Personal exemption: The personal exemption п which you're allowed to claim for yourself and each dependent you have – will go up $100 to $3,500 for 2008. Standard deduction: Single filers will see this deduction increase $100 from 2007 levels to $5,450. Married couples filing jointly will see their standard deduction rise to $10,950, $200 more, and the amount for heads of households who don't itemize will be $8,000, up $150. For married taxpayers age 65 and older, they'll be allowed to add $1,050 to the regular standard deduction п unchanged from 2007, and singles will get an extra $1,350 compared to $1,300 in tax year 2007. Phase-out of itemized deductions: Taxpayers will start to see the value of their itemized deductions go down after their taxable income exceeds $159,950 in 2008. That's $3,550 higher than in 2007. Retirement plan contributions: The contribution amount allowed for Roth IRAs begins to phase out for joint filers with incomes exceeding $159,000 (up from $156,000 in 2007) and $101,000 (up from $99,000) for singles and heads of household. For contributions to a traditional IRA, the deduction phase-out range for an individual covered by a retirement plan at work begins at income of $85,000 for joint filers (up from $83,000) and $53,000 for a single person or head of household (up from $52,000). The annual contribution limit for most defined contribution plans rises to $46,000, up from $45,000 in 2007. Hope education credit: The maximum Hope credit, available for the first two years of post-secondary education, is $1,800, up from $1,650 in 2007. Energy breaks: The federal government extended its credit on 30 percent of qualified solar generators for residential use. The Kiddie Tax: 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 go up $100 to $1,800 in 2008. March 2008 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Miller Financial Advisors, a local member of FPA.
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