You love Tuesday Tax Time… the time of the week where your tax knowledge is exponentially increased in proportion to yours (and mine) brain size.

Some recent tax law changes before Congress went home this past October:

1.  Some AMT (Alternative Minimum Tax) provisions were added to the big financial firm rescue bill to help avoid taxing middle-income Americans.  The AMT is basically a second way to calculate tax, which denies the “rich” from taking certain tax breaks and deductions.  Each year, the income exemption of those who won’t have to pay AMT has to be raised so that middle-income Americans aren’t affected.  For the 2008 year, the exemption for married folks is $69,950 and the exemption for single taxpayers is $46,200.  That’ll just about pay for a weekly box of Lucky Charms and a tank of gas to Wal-Mart.  Happy freakin’ spending…

2.  The Social Security Tax wage base has been increased to $106,800 for 2008.  That is, when your income at work goes over this amount, you get to stop paying social security tax (you lucky dog, you).  But the Medicare tax continues to apply, without any limits.  Social Security tax and Medicare tax rates (both paid by every American earning a paycheck from a job) are 6.2% and 1.45%, respectively (add them both together and what do you got? – 7.65% – which is what you see taken out of your check each pay period). 

3.  Those receiving social security checks got an increase for the upcoming year… the raise will be 5.8%, which represents a cost-of-living hike.  Now you can buy more TV dinners (does anyone still eat those?)

4.  If you choose to take your social security early between the ages of 62 and 66, then you can only make up to $14,160 from other jobs before you start losing your benefits.  Ouch!  They’ll pay you less.  But once you are over 66 years of age, there is no limit to what you can make at another job… you’ll still get your full benefits.  Sweeeeetttt!

5.  You can contribute up to $16,500 through your 401(k) in 2009 (this is the same for a 403(b) plan).  If you have a SIMPLE, you can contribute up to $11,500.  If you are going to be putting money in your traditional or Roth IRA, then you can put in up to $5,000 for 2008.

Thanks, Jason M. Blumer

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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