New Tax Savings for 2008

If you’re filing your 2007 tax returns, which I’m assuming you are or are about to (unless, of course, you’re one of those procrastinators that goes into emergency mode around that magic deadline), there are a few tax updates for 2008.

This year, tax brackets, standard deductions, and personal exemptions have been adjusted to reflect inflation. Senior in 2008 are entitled to more cash back. The AMT tax, which affects millions of taxpayers around the country, has been held by Congress. And there are a few more must-knows that may affect you, so pay attention.

One of the things to pay attention to is your income this year. If it’s the same as last year, your tax bill will likely decline.
Depending on your marital status and the number of children you have, you could be saving enough to take a nice little trip or throw a little more into your savings or retirement plan.

If you’re married and have four kids, and you’ve earned over $100k in the previous two years, you may be able to save a little over $500 bucks. If you’re single and earn $50k/yr and claim the standard deduction, you might just save yourself a little over $200.

This year, tax brackets have widened. What this means to you is that your income will now be taxed at a lower rate than last year. Basically, the more you earn, the more you’ll save, because more of your income is now going to fall into the lower bracket than previous years.

Add to that the fact that several sections of the tax code, including personal exemption, standard deduction amounts, have been adjusted for inflation, and things may look a little brighter for you this year than last.

After a taxpayer’s taxable income exceeds $156,400, they begin to lose the value they normally would see from itemized deductions. If you are married and your modified adjusted gross income is below $83,000, you can take the full IRA deduction. If you’re single, or if you are filing as head of household, it’s $52,000.

The contribution you can make for this year’s 401(k) plan has gone up $500 to a maximum of $15,500. If you’re over 50, and nearing retirement, you can stash away $20,500, which is up $500 as well.

As you earn more money, itemized deductions and personal exemptions are slowly lowered or phased out, depending on how much you make.

Overall, it helps to have a financial adviser. If you want to have a go at figuring out the complexities in the tax laws, make sure you are very diligent–after all, it’s your money.
To find out more information on taxex, check out Bankrate’s Blog.