Useful Income Tax and Retirement Planning Information

There have been several major tax law changes over the past few years with staggered effective dates. These laws have significantly changed the way you may want to consider your financial situation, especially retirement planning. Here is some information that you find helpful:

Income tax information (2008)

Income tax rate schedules for 2008

2008 Single Return Rate Schedule

Taxable income levels	Tax rate
0 to $8,025	10%
$8,026 to $32,550	15%
$32,551 to $78,850	25%
$78,851 to 164,550	28%
$164,551 to $357,700	33%
Over $357,700	35%

 

2008 Married Filing Jointly Rate Schedule

Taxable income levels	Tax rate
0 to $16,050	10%
$16,051 to $65,100	15%
$65,101 to $131,450	25%
$131,451 to $200,300	28%
$200,301 to $357,700	33%
Over $357,700	35%

 

Income tax information (2009)

Income tax rate schedules for 2009

2009 Single Return Rate Schedule

Taxable income levels	Tax rate
0 to $8,350	10%
$8,351 to $33,950	15%
$33,951 to $82,250	25%
$82,251 to 171,550	28%
$171,551 to $372,950	33%
Over $372,950	35%

 

2009 Married Filing Jointly Rate Schedule

Taxable income levels	Tax rate
0 to $16,700	10%
$16,701 to $67,900	15%
$67,901 to $137,050	25%
$137,051 to $208,850	28%
$208,851 to $372,950	33%
Over $372,950	35%

 

Taxation of dividends and long-term capital gains

For taxpayers in the 10% and 15% brackets, qualifying dividends and long-term capital gains (assets held for more than a year) will be taxed at 5%. For those in higher tax brackets, the special tax rate is 15%. These preferential rates were scheduled to expire at the end of 2008, but the 2006 tax law changes extended these rates through 2010.

Estate taxes

Year	Estate Size Where Taxation Starts	Top estate tax rate
2008	$2,000,000	45%
2009	$3,500,000	45%
2010	No estate taxation
2011	Re-instatement of old (2001) rates with estates over $675,000 being taxed	55%

 

Regular IRA and Roth IRA contribution limits

For tax year	IRA contribution limit	Additional contribution limits for those age 50 and over
2008	$5,000	$1,000
2009	$5,000	$1,000

 

401(k) retirement plan contribution limits

For tax year	401(k) deferral limit	Additional contribution limits for those age 50 and over
2008	$15,500	$5,000
2009	$16,500	$5,500

 

Education (or Coverdell) IRAs

The annual contribution limit is $2,000 with eligibility phase out beginning at $190,000 (for married filing jointly) and $95,000 of Adjusted Gross Income (some modifications apply).

Annual gift tax exclusion

For 2008, gifts of $12,000 and under are not subject to gift tax. The exclusion increased to $13,000 for 2009.

Social Security

2009 Employee wages subject to Social Security tax of 6.2% - $106,800
2009 Employee wages subject to Medicare tax of 1.45% - no limit
2009 Self employment income subject to Social Security tax of 12.4% - $106,800
2009 Self employment income subject to Medicare tax of 2.9% - no limit
2009 Average monthly benefit for all retired workers - $1,153
2009 Average monthly benefit for retired couples - $1,876
2009 Maximum monthly benefit for a worker at full retirement age - $2,323