The Kiplinger Tax Letter, dated December 28, 2007, reported the following highlights to Individual Income Tax changes, for the year 2008:
- Filers who are in the 10% or 15% income tax brackets will be taxed at a top rate of
zero per cent on long term capital gains. Once their taxable income hits the 25%
bracket, the rate on long term capital gains goes to 15%.
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2. The Kiddie Tax is expanded from taxpayers of under age 18 in 2006 and 2007 to ages 19 and under in 2008 and to ages 24 and under, for those who are full time students and whose earned income is less than half of their support, also in 2008.
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When selling a principal residence, surviving spouses are allowed to use the
$ 500,000 exclusion of gain on the sale for residences sold within two years of the
death of the spouse.
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For Health Savings Accounts, taxpayers are generally allowed to deduct up to
$ 5,800 for family coverage and $ 2,900 for single individual coverage. Family out
of pocket medical expenses are deductible to $ 11,200, while single individual
expenses are $ 5,600, in 2008.
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Deductible student loan interest begins to phase out at Adjusted Gross Income of
$ 115,000 for joint taxpayers.
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IRA and Roth IRA contributions increase to $ 5,000 and those born before 1959
can contribute an additional $ 1,000. There are restrictions on who may contribute to an IRA.
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Employees and the Self Employed will pay Social Security Taxes on wages up to
$ 102,000, in 2008.
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The Standard Mileage rate for business mileage increases to 50 ½ cents per mile.
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Expenses for adopting a child may be taken as a credit for expenses up to
$ 11,600. There are restrictions on the credit.
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In 2008, even the highest income earners will get at least a $ 2,333 personal
exemption as a deduction on an individual income tax return. Exemptions may
have been completely phased out, for high incomers, in 2007 and prior years.
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