Tax Updates for 2008

Social security changes

· The social security wage base increases to $102,000 in 2008.
As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, all covered wages are still subject to the 1.45% tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, remains at 7.65% for 2008. The maximum social security tax employees and employers will each pay in 2008 is $6,324.00. This is an increase of $279.00 from the 2007 maximum of $6,045.00.

The social security wage base for self-employed individuals in 2008 will also be $102,000. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate remains 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%). In 2008, the maximum social security tax for a self-employed individual will be $12,648.00. This is an increase of $558.00 from the 2007 maximum of $12,090.00.

Pension Plan Changes

· EE elective deferral limit for 403(b) plan contributions remains at $15,500. The catch-up contribution limit for individuals over age 50 remains at $5,000.

Other Changes for 2008

· Qualified transportation fringe benefit limit increases to $115 per month. Parking limit increases to $220 per month.

· Personal exemption amount for 2008 increases to $3,500.

· Standard deduction amounts increased:

MFJ - $10,900
HH - $8,000
S - $5,450
MFS - $5,450