IRS Publishes Official 2007 Tax Rates, Standard Deduction And Other Key Inflation-Adjusted Amounts updated 6/23/08

Rates: 2007 | 2009 | 2010

Overpayment and underpayment interest rates

The interest rates for overpayments and underpayments for 4/1/08 through 6/30/08:

IR-2008-30, Rev. Rul. 2008-10 new 3/5/08

Standard auto expense mileage rate (cents per mile)

 
  2003 2004 2005 1 9-12/
2005 2		 2006 2007 2008 3 6-12/
2008 4
Business 36¢ 37.5¢ 40.5¢ 48.5¢ 44.5¢ 48.5¢ 50.5¢ 58.5¢
Charitable 14¢ 14¢ 14¢ 14¢ 14¢ 14¢ 14¢ 14¢
Medical/Moving 12¢ 14¢ 15¢ 15¢ 18¢ 20¢ 19¢ 27¢

1 IRS News Release IR-2004-139, 11/17/04. When the 2005 business standard mileage rate of 40.5¢ is used, depreciation will be considered to have been allowed at a rate of 17¢ per mile. updated 11/28/04

2 IRS News Release IR-2005-99, 9/905 new 9/18/05

3 IR 2007-92, Rev. Proc. 2007-70 new 11/28/07

4 IR-2008-82, June 23, 2008, Announcement 2008-63, increases rates for last 6 months of 2008 new 6/23/08

Fair market values for employer-provided vehicles using the cents-per-mile valuation

IRS corrected 2008 maximum fair market values (FMVs) for employer-provided vehicles using the cents-per-mile valuation are $15,000 for passenger automobiles, and $15,900 for trucks or vans, including minivans and sport-utility vehicles (SUVs) built on a truck chassis (slightly lower than the 2007 FMVs). The originally released 2008 maximum fleet-average vehicle FMVs are unchanged. Announcement 2008-15. new 3/5/08

2007 Capital gain tax rates

Holding period Maximum tax rate
12 months or less (short term) 35%
more than 12 months (long term) 15%
Key long term 15% rate exceptions:  
collectibles, such as art work 28%
gain attributable to depreciation on real property 25%
gain that would be taxes at 10% or 15% based on the taxpayers' regular income tax rate  5%

2007 Income Tax Rates

Taxable Income Tax Marginal Rate
(tax on next dollar) 		  Standard
deduction
Married filing joint return and surviving spouses $10,700
Less than $15,650   10%    
$15,650-$63,700 $1,565 + 15%  over $15,650  
$63,700-$128,500 $8,772.50 + 25%  over $63,700  
$128,500-$195,850 $24,972.50 + 28%  over $128,500  
$195,850-$349,700 $43,830.50 + 33%  over $195,850  
Over $349,700 $94,601 + 35%  over $349,700  
Heads of Households $7,850
Less than $11,200   10%    
$11,200-$42,650 $1,120 + 15% over $11,200  
$42,650-$110,100 $5,837.50 + 25% over $42,650  
$110,100-$178,350 $22,700 + 28%  over $110,100  
$178,350-$349,700 $41,810 + 33% over $178,350  
Over $349,700 $98,355.50 + 35%  over $349,700  
Single $5,350
Less than $7,825   10%    
$7,825-$31,850 $4,000 + 15%  over $7,825  
$31,850-$77,100 $4,386.25 + 25%  over $31,850  
$77,100-$160,850 $15,698.75 + 28%  over $77,100  
$160,850-$349,700 $39,148.75 + 33% over $160,850  
Over $349,700 $101,469.25 + 35%  over $319,100  
Married Separate $5,350
Less than $7,825   10%    
$7,825-$31,850 $782.50 + 15% $7,825  
$31,850-$64,250 $4,386.25 + 25% over $31,850  
$64,250-$97,925 $12,486.25 + 28%  over $64,250  
$97,925-$174,850 $21,915.25 + 33%  over $97,925  
Over $174,850 $47,300.50 + 35%  over $174,850  
Estates and Trusts
less than $2,150   15%    
$2,150-$5,000 $322.50 + 25% over $2,150  
$5,000-$7,650 $1,035 + 28%  over $5,000  
$7,650-$10,450 $1,777 + 33% over $7,650  
Over $10,450 $2,701 + 35%  over $10,450  

The standard deduction amount for an individual who may be claimed as a dependent by another taxpayer may not exceed the greater of $850 or the sum of $300 and the individual's earned income. new 1/14/07

For 2007, the additional standard deduction amount for a person who is age 65 or older or blind is $1,050. If you are single and not a surviving spouse, the additional standard deduction amount is $1,300. new 1/14/07

Additional standard deduction amounts

The additional standard deduction amounts under § 63(f) for the aged and for the blind are $1,050 for each, increased to $1,300 if also unmarried and not a surviving spouse.

Itemized deduction phase out

The "applicable amount" of adjusted gross income under § 68(b) (above which the amount of otherwise allowable itemized deductions is reduced under § 68) is $156,400 (or $78,200 for a separate return filed by a married individual).

Exemption amount

The $3,400 personal exemption amount under § 151(d), begins to phase out at, and is completely phased out after, the following adjusted gross income amounts: updated 1/14/07

 

Filing Status Threshold Completely phased out
Married Individuals Filing Joint Returns 
and Surviving Spouse		 $234,600 $357,100
Heads of Households $195,500 $318,000
Unmarried (single) Individuals  $156,400 $278,900
Married Individuals Filing Separately $117,300 $178,550

"Kiddie tax" – unearned income of minor children taxed as if parent's income new 5/31/07

The § 1(g)(4)(A)(ii)(I) amount used to reduce the net unearned income reported on the child's return that is subject to the "kiddie tax," is $850. (This amount is the same as the $850 standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer, which may not exceed the greater of $800 or the $250 plus the individual's earned income.) A child's gross income must be more than $850 but less than $8,500 for a parent to elect to include a child's gross income in the parent's gross income and for calculating the "kiddie tax" to satisfy that requirement.

For a child to whom the § 1(g) "kiddie tax" applies, the alternative minimum tax exemption amount under § § 55 and 59(j) may not exceed the child's earned income for the taxable year, plus $5,750.

The Small Business and Work Opportunity Tax Act of 2007 (H.R. 2206) expands the kiddie tax to apply to children who are under age 19 or who are full-time students under age 24 (14 in 2005, under 18 in 2006).

Adoption credit

The maximum credit for an adoption of a special needs child is $11,390 (§ 23(a)(3)), and for other adoptions is the amount of qualified adoption expenses up to $10,390 (§ 23(b)(1)). The available adoption credit begins to phase out for taxpayers with modified adjusted gross income exceeding $170,820 and is completely phased out at $210,820 (§ 23(b)(2)(A)). The same limits apply to employer adoption assistance programs under § 137(a)(2) and § 137(b)(1).

Child tax credit

The amount of credit under § 24 that may be refundable is $11,750, § 24(d)(1)(B)(i).

Hope and lifetime learning credits

Adjusted gross income phase-out ranges:

Tax break Single filers Joint filers
ESA contribution $95,000-$110,000 $190,000-$220,000
Hope credit $47,000-$57,000 $94,000-$114,000
Lifetime earning credit $47,000-$57,000 $94,000-$114,000
Tuition and fees deduction $65,000-$80,000 $130,000-$160,000
Student loan interest deduction $55,000-$70,000 $110,000-$140,000

100% of qualified tuition and related expenses not in excess of $1,100 and 50 percent of such expenses in excess of $1,100 (§ 25A(b)(1)). The amount of your Hope or lifetime learning credit is phased out (gradually reduced) if taxpayer's modified adjusted gross income exceeds $47,000 and up to $57,000 ($94,000 to $114,000 for a joint return) in determining the reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Lifetime Learning Credits otherwise allowable under § 25A(a).

Earned income credit (EIC) updated 2/4/08

See also:

The following amounts are used to determine the earned income credit under § 32(b). To qualify you must work and have "earned income". The "earned income amount" is the amount of earned income at or above which the maximum amount of the earned income credit is allowed. The "threshold phase out amount" is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins to phase out. The "completed phase out amount" is the amount of adjusted gross income (or if greater, earned income) at or above which no credit is allowed. If you are married, you must file a joint return to receive the credit. You must be a US citizen or resident alien all year to qualify.

If your earned income credit (EIC) for any year after 1996 was denied (disallowed) or reduced by the IRS, you may need to complete an additional form (8862) to claim the credit for 2007.

Your qualifying child cannot be used by more than than one person. You can choose which person will claim the EIC and all of the following 5 tax benefits based on the qualifying child: child’s exemption; child tax credit; Head of household filing status; credit for child and dependent care expenses; exclusion for dependent care benefits.

To be your qualifying child, a child must be your:

If your child was married at the end of the year, he or she does not meet
the relationship test unless either of these two situations applies to you:

  1. You can claim the child’s exemption, or
  2. The reason you cannot claim the child’s exemption is that you gave that right to your
    child’s other parent under the Special rule for divorced or separated parents,
    described later.

Age Test – Your child must be:

  1. Under age 19 at the end of 2007,
  2. Under age 24 at the end of 2007 and a student, or
  3. Permanently and totally disabled at any time during 2007, regardless of age.

2007

Number of Qualifying Children One Two or More None
Earned Income Amount $8,390 $11,790 $5,590
Maximum Amount of Credit $2,853 $4,716 $428
Completed Phase Out Amount $33,241 $37,783 $12,590
Completed Phase Out Amount (Married Joint) $35,241 $39,783 $14,590

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer. Investment income must be $2,900 or less for the year or the EIC is denied. The maximum Advance Earned Income Tax Credit (advance EITC) for tax year 2007 the employer is allowed to provide throughout the year with the employee's pay is $1,712.

2008

Number of Qualifying Children One Two or More None
Earned Income Amount $8,390 $11,790 $5,590
Maximum Amount of Credit $2,917 $4,824 $438
Completed Phase Out Amount $33,995 $38,646 $12,280
Completed Phase Out Amount (Married Joint) $36,995 $41,646 $15,880

Investment income must be $2,950 or less for the year or the EIC is denied for 2008. The maximum advance EITC for tax year 2008 the employer is allowed to provide throughout the year with the employee's pay is $1,750.

§ 179 expense

A taxpayer may elect to expense up to $112,000 (§ 179(b)(1)), reduced (but not below zero) by the the cost of § 179 property placed in service during the 2007 taxable year in excess of $450,000.

Educator expenses deduction

An eligible educator in 2006 can deduct up to $250 of qualified expenses paid in 2006 as an adjustment to gross income, rather than as a miscellaneous itemized deduction. This provision has been extended through tax year 2007. If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. However, neither spouse can deduct more than $250 of his or her qualified expenses. An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide who worked in a school for at least 900 hours during a school year. Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. An ordinary expense is one that is common and accepted in your educational field. A necessary expense is one that is helpful and appropriate for your profession as an educator. An expense does not have to be required to be considered necessary. Qualified expenses do not include expenses for home schooling or nonathletic supplies for courses in health or physical education. new 1/14/07

Social Security / Medicare tax new 1/14/07

  Social Security Medicare Total Tax
2007 income limit $97,500 none n/a
Employee rate 6.2% 1.45% 7.65%
Employer rate 6.2% 1.45% 7.65%
Self-employed rate 12.4% 2.90% 15.30%

All covered 2007 wages are subject to the Medicare tax.

Transfer tax exemptions and rates (estate and gift) new 2/2/08

Year Estate and GST tax exceptions 1 Gift tax exemptions Highest estate, GST and gift tax rate
2007 $2 million $1 million 45%
2008 $2 million $1 million 45%
2009 $3.5 million $1 million 45%
2010 (repealed) $1 million 35% 3
2011 $1 million 2 $1 million 55% 4

1 Less any gift tax and GST tax exemption, respectively, used during life.

2 The GST tax exemption is adjusted for inflation.

3 Gift tax only, Equal to highest marginal income tax rate, which is currently 35%.

4 Reverts to 2001 rules. The benefits of the graduated estate and gift tax rates and exemptions are phased out for estates and gifts over $10 million.

2007 Retirement contribution limits new 2/2/08

Plan type Contribution limit Contribution limit for taxpayers 50 and over
Tradition and Roth IRAs $4,000 $5,000
401(k), 403(b), 457 and SARSEP 1 $15,500 $20,000
SIMPLE $10,500 $13,000
SEP and defined contribution Keogh $45,000 $45,000 2

1 Includes Roth versions where applicable

2 Not subject to "catch-up" provisions