2008 Tax Brackets

Tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). Essentially, they are the cutoff values for taxable income — income past a certain point will be taxed at a higher rate.

Expanding the brackets means that a touch more of your income will be taxed at lower rates than might have been the case last year. That will mean savings for you.

The IRS is required by law to adjust the dollar amounts for a variety of tax provisions each year to keep pace with inflation.

The adjustments of tax brackets, standard deductions, personal exemptions, earned-income credits and other things affect about three dozen areas of tax rules.

The IRS publishes the next year’s tax rates in the fall. So 2008 tax brackets, as well as amounts for standard deductions, personal exemptions and other tax areas, are already published.

You can get more information on 2008 tax law changes here.

For 2008, The value of each personal and dependency exemption, available to most taxpayers, is $3,500, up $100 from 2007. The new standard deduction is $10,900 for married couples filing a joint return (up $200), $5,450 for singles and married individuals filing separately (up $100) and $8,000 for heads of household (up $150). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.