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Please keep in mind that preliminary information often changes due to political pressures in Washington and locally.
Zero Long-term capital gains tax rate:
Taxpayers in the 10% or 15% tax brackets will NOT be taxed on any capital gains. Therefore, the capital gains rate for these taxpayers is 0%. However, the long-term capital gains rate remains at 15% for taxpayers in all other tax brackets. Note that special rules may apply to some situations such as depreciation recapture, collectibles, etc.
2008 Standard Mileage Rates:
Business $0.505 per mile
Charitable $0.14 per mile
Medical $0.19 per mile
The personal exemption:
Which you claim for yourself and each dependent, will rise to $3,500 for 2008, up $100 from the 2007 level. For folks in the 25% bracket, that saves 25 bucks for each exemption claimed. For a husband and wife with two kids, the savings will add up to $100.
The standard deduction:
Which is used by nearly two-thirds of all taxpayers, will increase for each filing status. Singles will enjoy a $100 hike, to $5,450 from this year's $5,350. Married couples filing jointly will see their standard deduction rise to $10,950, $250 more than they will claim on 2007 returns. The standard deduction for heads of household who do not itemize deductions will increase $150, to $8,000 on 2008 returns.
The tax brackets:
Will become broader; meaning more of your income will be taxed at lower rates. The 10% bracket on 2008 joint returns will cover the first $16,050 of taxable income, Kiplinger's estimates. That's $400 more than in 2007. Taxing that amount at 10% rather than 15% will save couples $20. Not enough for a wild celebration, perhaps, but the higher your income, the more you save as more dollars fall into lower brackets. As the top of the 15% bracket rises, for example, some income that used to be taxed at 25% will be hit by the 15% rate.
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 extra $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.
Section 179 depreciation deduction:
The Section 179 maximum deduction increases to $128,000. The phase-out threshold also increases to $510,000.
HSA contributions:
HSA contribution limits have increased to $2,900 for individuals and $5,800 for families. An additional $900 may be contributed for those 55 and older.
IRA contributions:
IRA contribution limits have increased to $5,000. An additional $1,000 may be contributed for those 50 and older.
Itemized deduction phase out:
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 phase out:
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.
Adoption Tax credit:
The credit increases to $11,650 for the adoption of an eligible child.
Hope college credit:
The maximum hope college credit increases to $1,800.
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 today. It does rise each year, however, based on average wage data that will not be announced until later in the year. Kiplinger's estimates that the wage base will break six figures in 2008, rising from $97,500 this year to around $102,000 in 2008.
Estate tax:
The top rate remains at 45%, and the exemption amount remains at $2,000,000.
Gift tax:
The annual Gift tax exclusion amount remains at $12,000.
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