The 2008 standard deduction, tax bracket amounts, and other inflation-adjusted tax figures are now able to be projected based on recently released U.S. Department of Labor inflation data.  Inflation for next year’s tax amounts are based on inflation from September 2006 through August 2007.  As we have all experienced lately, inflation is ratcheting up.  One benefit to this otherwise unsettling news is that, since the rate of inflation this past year was higher than in the previous year, the increase in the 2008 bracket and other tax amounts will save you proportionately more on your eventual 2008 tax bill.  Our projections are based on those supplied by CCH, a Wolters Kluwer business and a leading U.S. tax law information provider.  Official IRS 2008 projections are set to be released later this year.

Projected 2008 inflation-adjusted tax amounts include the following:

• Single taxpayers.  A projected $100 increase (from $5,350 in 2007 to $5,450 in 2008) in the standard deduction amount. 

• Married couples filing jointly.  A projected $200 increase (from $10,700 in 2007 to $10,900 in 2008) in the standard deduction amounts. 

• Personal exemption.  A projected $100 increase (from $3,400 in 2007 to $3,500 in 2008). 

• Gift tax annual exclusion.  The amount remains at $12,000 ($24,000 for split gifts).

Pease limitation.  For 2008, married couples filing jointly will begin to lose some of the value of certain itemized deductions when their adjusted gross income (AGI) exceeds $159,950 (up from $156,400 in 2007).  Starting in 2008, taxpayers only lose one-third of the amount otherwise required under the phase-outs, down from two-thirds in 2006 and 2007.  Therefore, reduction of the phase-out of the value of their personal exemptions, which starts with adjusted gross income exceeding $239,950 (up from $234,600 in 2007), will be limited to one-third of the excess.  These reductions are called “Pease limitations” after the Congressman who fought for them. 

Roth IRAs.  The AGI limits for maximum Roth IRA contributions continue to be adjusted for inflation for 2008: married filing jointly, $159,000 (formerly $156,000), married filing separately (remains at $0); other filing statuses, other than married filing jointly or separately $101,000 (formerly $99,000). 

IRAs.  AGI limits for maximum IRA deductible contributions by active participants in a retirement plan have been adjusted for 2008: married filing jointly, $85,000 ($83,000 in 2007); head of household, single $53,000 ($52,000 in 2007); and married filing jointly when only the other spouse is covered by a qualified plan, $159,000 ($156,000 in 2007).