Tax Rates and Contribution Limits

Tax Brackets



2006 Tax Brackets

Single Married, filing jointly Married, filing separately Head of Household 10% $7,550 or less: 10% of taxable income $15,100 or less: 10% of taxable income $7,550 or less: 10% of taxable income $10,750 or less: 10% of taxable income 15% $7,551-30,650: $755 + 15% of amount over $7,550 $15,101-61,300: $1,510 + 15% of amount over $15,100 $7,551-30,650: $755 + 15% of amount over $7,550 $10,751-41,050: $1,075 + 15% of amount over $10,750 25% $30,651-74,200: $4,220 +25% of amount over $30,650 $61,301 - 123,700: $8,440 + 25% of amount over $61,301 $30,651-61,850: $4,220 + 25% of amount over $30,650 $41,051-106,900: $5,620 + 25% of amount over $41,050 28% $74,201 -154,800: $15,107.50 + 28% of amount over $74,200 $123,701 - 188,450 $24,040 + 28% of amount over $123,700 $61,851-94,225: $12,020 + 28% of amount over $61,850 $106,001-171,650: $21,857.50+ 28% of amount over $106,000 33% $154,801-336,550: $37,675.50 + 33% of amount over 154,801 $188,451-336,550: $42,170 + 33% of amount over $188,450 $94,226-$168,275: $21,085 + 33% of amount over $94,225 $171,651-336,550: $40,239.50 + 33% of amount over $171,650 35% Over $336,550: $97,653 + 35% of amount over 336,550 Over $336,550: $91,043 + 35% of amount over $336,550 Over $168,275: $45,521 + 35% of amount over $168,275 Over $336,550: $94,656.50 +35% of amount over $336,550

2007 Tax Brackets

 

 

Child Tax Credit
The child tax credit is $700 for 2005 - 2008. That means you can subtract $600 from the taxes you owe for every child under age 17 you claim as a dependent. The child tax credit rises to: 

• $800 in 2009. 
• $1,000 in 2010. 

To take the credit you must have an income of less than $110,000 when filing a joint return; $75,000 if filing as a single head of household or qualifying widow(er); $55,000 if you are married but filing separately.

Traditional, Roth IRA Limits 
For 2006, you can contribute up to $4,000 to a traditional or a Roth IRA providing you meet the income requirements. If you're age 50 or over, you can contribute $5,000. The maximum contributions will be raised by another $1,000 in 2008. When fully phased in, the $5,000 limit will have approximately the same value as the original $2,000 contribution had when IRAs began in 1975 when allowing for inflation. 

Beginning in 2009, the IRA contribution, but not the age 50 and over catch-up amount  will be indexed for inflation in $500 increments. These higher contribution limits apply to both traditional IRAs and Roth IRAs.  Income limits and other restrictions continue to affect IRA participation. 

Tax-Deferred Employee Contributions to 401(k) or 403(b)
Beginning in 2007, increases in tax-deferred employee contributions to a 401(k) or 403(b) increases are indexed to inflation, rising in $500 increments.

Beginning in 2007, the age 50 or over catch-up contribution amount will also be indexed for inflation in $500 increments. These catch-up amounts are on top of other increases in the amount of salary that can be deferred to retirement plans. 

Your plan rules have the final control on contribution limits, but here are the new maximum amounts you could contribute each year, excluding any contribution from your employer: 

SIMPLE IRAs or SIMPLE 401(k)s

Contributions to SIMPLE IRAs or SIMPLE 401(k)s rise each year as follows: 

Tax Breaks for Low- and Moderate-Income Savers
Low- or moderate-income earners have a special incentive to save for retirement. If you fall within the law's income limits, you get a tax credit of up to $0.50 for each $1.00 up to the first $2,000 you contribute to your employer's plan or to an IRA. The credit applies only to the first $2,000 contributed, so the maximum tax credit is $1,000. 

That may not look like much, but look again. A married couple filing jointly, with income under $30,000, could save $2,000 to their plan at an out-of-pocket cost of only $700. The couple's 15% tax bracket means they would save $300 in taxes by deferring $2,000 and would receive the $1,000 credit. 

The table below shows the amount of tax credit that different taxpayer groups can receive, depending on their adjusted gross income. 

Education IRA 
The Education IRA gives parents and others the chance to save for education in a tax-advantaged account. Spend the proceeds from an Education IRA on qualified higher education expenses and the money goes untaxed. 

The maximum contribution to an Education IRA is $2,000 per child. In addition, tax-free withdrawals can be made for qualified elementary and secondary school expenses. Plus, taxpayers with higher incomes can now make contributions to an Education IRA.