Tax Numbers
The Henssler Financial Group Position Paper

Rates Unchanged

Reduced income tax rates are in effect for tax years January 1, 2008 through December 31, 2010. The income tax rates are 10%, 15%, 25%, 28%, 33% and 35%.

The long-term capital gains rate is 15% (5% for taxpayers in the 10% or 15% bracket) for sales through December 31, 2007. In 2008, the maximum rate remains at 15% but drops to 0% for taxpayers in the 10% or 15% bracket. Beginning January 1, 2009, the rates revert to the pre-Jobs and Growth Tax Relief Reconciliation Act of 2003 rates of 20% (10% for taxpayers in the 10% or 15% bracket).

Qualified dividends are taxed at the reduced capital gains rates. These reduced rates are effective for dividends received through December 31, 2008.

Standard Deduction

The additional standard deductions for the elderly and the blind for 2008 are $1,050 for joint returns and $1,350 for single and head of household returns.

The tax act of 2003 doubled the standard deduction for married couples to twice the amount of the standard deduction for single taxpayers for 2003 and 2004 only. The WFTRA eliminated the marriage penalty in the standard deduction through 2010.

Personal Exemption

Year 2008 — $3,500

Personal Exemption Phase-out Thresholds

Year 2008 — $239,950 for joint returns or a surviving spouse, $159,950 for single returns, $119,975 for married filing separately, and $199,950 for head of household returns.

AGI level for Itemized Deduction Limitation Thresholds

Year 2008— $145,950 ($72,975 for married filing separate returns)

Marginal Income Tax Rates For 2008

Joint Returns and Surviving Spouse

If taxable income is
$0 - $16,050	10% of the amount over $0
$16,050 - $65,100	$1,605 plus 15% of the amount over $16,050
$65,100 - $131,450	$8,962.50 plus 25% of the amount over $65,100
$131,450 - $200,300	$25,550.50 plus 28% of the amount over $131,450
$200,300- $357,700	$44,828 plus 33% of the amount over $200,300
$357,700 - over	$96,770 plus 35% of the amount over $357,700

Single Return

If taxable income is
$0 - $8,025	10% of the amount over $0
$8,025- $32,950	$802.50 plus 15% of the amount over $8,025
$32,950 - $78,890	$4,481.25 plus 25% of the amount over $32,950
$78,890 - $164,550	$16,056.25 plus 28% of the amount over $78,890
$164,550 - $357,700	$40,052.25 plus 33% of the amount over $164,550
$357,700 - over	$103,791.75 plus 35% of the amount over $357,700

Heads of Households

If taxable income is
$0 - $11,450	10% of the amount over $0
$11,450 - $43,650	$1,145 plus 15% of the amount over $11,450
$43,650 - $112,650	$5,975 plus 25% of the amount over $43,650
$112,650 - $182,400	$23,225 plus 28% of the amount over $112,650
$182,400 - $357,700	$42,755 plus 33% of the amount over $182,400
$357,700 - over	$100,604 plus 35% of the amount over $357,700

Small Business Expensing
In lieu of depreciation, business taxpayers may annually expense up to $128,000 of qualified property placed in service during 2008.

Depreciation of Sport Utility Vehicles
The amount of first-year expensing allowed for a SUV used for business is $25,000 and regular depreciation.

Teachers' Expense Deduction
The WFTRA reinstated the educator expense deduction, which had expired at the end of 2003. Teachers and other educators should save their receipts for books and other classroom supplies. They will be able to deduct up to $250 of un-reimbursed expenses again in 2007. Unless there is further action by Congress, these expenses will be deductible as miscellaneous itemized deductions and subject to 2% of Adjusted Gross Income.

Sales Tax Deduction
Taxpayers who itemize deductions will have a choice of claiming a state and local tax deduction for either sales or income taxes on their 2007 returns. The IRS will provide optional tables for use in determining the deduction amount, relieving taxpayers of the need to save receipts throughout the year. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for sales or income taxes.

College Tuition Deduction
A deduction used in computing adjusted gross income (AGI) is allowed for qualified higher education expenses in 2008. Singles with AGI of not more than $65,000 ($130,000 if married filing jointly) can deduct up to $4,000 or singles with AGI of not more than $80,000 ($160,000 if married filing jointly) can deduct up to $2,000.

Student Loan Interest Deduction
The maximum deduction is $2,500 for interest paid on qualified education loans for Single Returns with AGI up to $50,000 and Married Filing Joint Returns with AGI up to $100,000. The deduction is completely phased out for AGI above $65,000/$135,000.

Education Savings Account
The annual contribution remains $2,000 (not tax deductible). The AGI of a permitted contributor remains $190,000 for married filing jointly and $95,000 for single. Contributions can be made until April 15 of the following year. "Qualified education expenses" includes elementary and secondary school tuition.

Traditional IRA and Roth IRA Contributions
The annual contribution limit increases to $4,000 for 2008. Catch-up contributions for individuals age 50 or older remain at $500 for 2008. In 2008, the maximum catch-up contribution amount will remain at $1,000.

Dependent Care Credit
The maximum amount of employment-related expenses eligible for the dependent care credit is $2,500 (for one qualifying individual) and $5,000 (for two or more qualifying individuals). The maximum credit is 35% and the reduction of this percentage is 1% for each $2,000 (or fraction thereof) of AGI above $15,000 with a maximum reduction of no more than 15 percentage points.

Child Tax Credit
The child tax credit is $1,000 for 2008 through 2010 as amended by the WFTRA. Prior to WFTRA the credit was scheduled to decrease in 2005 through 2008. The credit is now scheduled to decrease to $500 in 2011.

Contributions to Salary Reduction Plans
For 401(k), 403(b), SEP and 457 Plans you can defer up to $15,500 in 2008. If you will reach age 50 by the end of the plan year, you can defer an additional $5,000 in 2008 for a total contribution of $20,500.

For SIMPLE IRAs and SIMPLE 401(k)s, the contribution limit is $10,500 in 2008, unchanged from 2007. If you will reach age 50 by the end of the plan year, you can defer an additional $2,500 in 2008.

Defined Contribution Plans — "Profit Sharing Plans"
For 2008, the annual additions limit for most defined contribution (including SEP) plans is the lesser of $46,000 or 100% of compensation, up from $45,000 in 2007. The maximum deduction limit for contributions is 25% of compensation. The compensation that may be considered is $230,000 for 2008.

Nanny Tax
Nanny tax is due for 2008 if you paid household help $1,600 or more.

2008 Social Security Changes

Social Security beneficiaries will receive a 2.3% cost of living adjustment for 2008.

Maximum earnings subject to Social Security tax is $102,000. The tax rate remains unchanged at 6.2% Social Security and 1.45% Medicare (7.65% on first $90,000) for employees. These rates for the self-employed total 15.3%.

The limit on earnings, if collecting Social Security and under age 65, will be $12,000 per year or $1,000 per month. One dollar in benefits will be withheld for every $2 in earnings above the limit.

Mileage Rates

Business Rate: The 2008 mileage rate is 50.5¢.
Medical/Moving Rate: The 2008 rate is 19¢.

If you would like any further information regarding this issue as well as any other tax related issue, please contact The Henssler Financial Group Tax & Accounting Division at 770-428-4025.