Now that 2007 tax returns are complete it’s time to begin thinking about 2008 and 2009. The IRS announced this past week inflation adjustments for 2009:
– Personal exemptions will increase from $3350 in 2007 to $3500 in 2008 to $3650 in 2009;
– The standard deduction will increase from $5350/$10,700 (single/married filing jointly) in 2007 to $5450/$10,900 in 2008 to $5700/$11,400 in 2009;
– The maximum foreign earned income exclusion will increase from $85,700 in 2007 to $87,600 in 2008 to $91,400 in 2009; and
– The annual gift tax exclusion will increase in 2009 to $13,000.
Meanwhile, the Social Security Administration announced that the annual wage limitation for social security tax in 2009 will be the first $106,200 in wages (up from $102,000 in 2008). For the self-employed, this means that the self-employment tax will be 15.3% on the first $106,200 in self-employment earnings in 2009 and 2.9% on earnings above that.