Inflation Adjustments Widen Tax Brackets

The Internal Revenue Service said that personal exemptions and standard deductions would rise and tax brackets would widen as it adjusted a variety of tax provisions for 2008 to keep pace with inflation.

The IRS said the value of each personal and dependency exemption would go up $100 to $3,500. The new standard deduction rose $200 to $10,900 for married couples filing a joint return. It also went up $100 to $5,450 for singles and married individuals filing separately, and $150 to $8,000 for heads of households.

Tax bracket thresholds are also increasing for each filing status. For a married couple filing a joint return, for example, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket is $65,100, up from $63,700 in 2007. 

The maximum earned income tax credit for low- and moderate-income workers and working families with two or more children is $4,824, up from $4,716. The income limit for the credit for joint return filers with two or more children is $41,646, up from $39,783. The annual contribution limit for most defined-contribution plans is $46,000, up from $45,000 in 2007.