2007/2008 Tax Year notes

In 2007, the two lowest tax brackets (10% and 15%) incur a 5% tax rate on capital gains and dividends. In 2008, it drops to 0% (yes, zero). The 0% rate extends into 2009 and 2010.

The IRA contribution limit increases to $5,000 in 2008. Individuals age 50 or great can make an additional $1,000 catch-up contribution in 2008.

Effective tax rate – the average rate of tax you pay on all your taxable income.

Marginal tax rate – the rate of tax you pay on your last dollar of income.

Social Security Tax – Employer and Employee each pay 6.2% (12.4% total) on all earned income up to $97,500. Beyond that amount, there is no social security tax.

Medicare Tax – Employer and Employee each pay 1.45% (2.9% total) on all earned income – no maximum amount imposed.

AMT is effecting more taxpayers each year as our tax code evolves into a flat-tax system. Below are AMT tax limits at this time:
Single Head of Household: $33,750 exempt. 26% $1 to $175,000. 28% Over $175,000
Married Filing Jointly: $45,000 exempt. 26% $1 to $175,000. 28% Over $175,000
Married Filing Seperately: $22,500 exempt. 26% $1 to $87,500. 28% Over $87,500

Married Filing Jointly
TAX 2007 TAXABLE
RATE INCOME
10% Not over $15,650
15% $15,650 – $63,700
25% $63,700 – $128,500
28% $128,500 – $195,850
33% $195,850 – $349,700
35% Over $349,700

Single Filers
TAX 2007 TAXABLE
RATE INCOME
10% Not over $7,825
15% $7,825 – $31,850
25% $31,850 – $77,100
28% $77,100 – $160,850
33% $160,850 – $349,700
35% Over $349,700

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