SECTION 2. CHANGES

.01 The excise taxes imposed under § 4261(b) and (c), as enacted by the Airport and Airway Trust Fund Tax Reinstatement Act of 1997 and extended by § 149(a) of Pub. L. No. 110–92, 121 Stat. 989 (2007), apply to transportation taken through November 16, 2007, and to amounts paid on or before November 16, 2007, for transportation beginning after that date. Accordingly, the amounts in § 4261(b) and (c) are not included in this revenue procedure.

.02 For 2008, the inflation adjusted items in §§ 25B, 219, and 408A also will

be included in a separate news release and related notice with other inflation adjusted amounts relating to pension and retirement accounts. For future years, these amounts will not be included in this revenue procedure but will appear only in the separate news release and related notice.

.03 For taxable years beginning after 2007, the inflation adjusted items for health savings accounts under § 223 are published no later than June 1 of the preceding calendar year. See § 223(g) and Rev. Proc. 2007–36, 2007–22 I.R.B. 1335. Accordingly, these items are not included in this revenue procedure.

.04 Section 1.148–3(d)(1)(iv) of the proposed Income Tax Regulations provides that on the last day of each bond year during which there are amounts allocated to gross proceeds of an issue that

TABLE 1 - Section 1(a). - Married Individuals Filing Joint Returns and Surviving Spouses.

If Taxable Income Is : The Tax Is :

Not over $16,050 10% of the taxable income

Over $16,050 but not over $65,100 $1,605 plus 15% of the excess over $16,050

Over $65,100 but not over $131,450 $8,962.50 plus 25% of the excess over $65,100

Over $131,450 but not over $200,300 $25,550 plus 28% of the excess over $131,450

Over $200,300 but not over $357,700 $44,828 plus 33% of the excess over $200,300

Over $357,700 $96,770 plus 35% of the excess over $357,700

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TABLE 2 - Section 1(b). - Heads of Households.

If Taxable Income Is : The Tax Is :

Not over $11,450 10% of the taxable income

Over $11,450 but not over $43,650 $1,145 plus 15% of the excess over $11,450

Over $43,650 but not over $112,650 $5,975 plus 25% of the excess over $43,650

Over $112,650 but not over $182,400 $23,225 plus 28% of the excess over $112,650

Over $182,400 but not over $357,700 $42,755 plus 33% of the excess over $182,400

Over $357,700 $100,604 plus 35% of the excess over $357,700

TABLE 3 — Section 1(c). - Unmarried Individuals (other than Surviving Spouses and Heads of Households).

If Taxable Income Is : The Tax Is :

Not over $8,025 10% of the taxable income

Over $8,025 but not over $32,550 $802.50 plus 15% of the excess over $8,025

Over $32,550 but not over $78,850 $4,481.25 plus 25% of the excess over $32,550

Over $78,850 but not over $164,550 $16,056.25 plus 28% of the excess over $78,850

Over $164,550 but not over $357,700 $40,052.25 plus 33% of the excess over $164,550

Over $357,700 $103,791.75 plus 35% of the excess over $357,700

TABLE 4 - Section 1(d). - Married Individuals Filing Separate Returns.

If Taxable Income Is : The Tax Is :

Not over $8,025 10% of the taxable income

Over $8,025 but not over $32,550 $802.50 plus 15% of the excess over $8,025

Over $32,550 but not over $65,725 $4,481.25 plus 25% of the excess over $32,550

Over $65,725 but not over $100,150 $12,775 plus 28% of the excess over $65,725

Over $100,150 but not over $178,850 $22,414 plus 33% of the excess over $100,150

Over $178,850 $48,385 plus 35% of the excess over $178,850

TABLE 5 - Section 1(e). - Estates and Trusts.

If Taxable Income Is : The Tax Is :

Not over $2,200 15% of the taxable income

Over $2,200 but not over $5,150 $330 plus 25% of the excess over $2,200

Over $5,150 but not over $7,850 $1,067.50 plus 28% of the excess over $5,150

Over $7,850 but not over $10,700 $1,823.50 plus 33% of the excess over $7,850

Over $10,700 $2,764 plus 35% of the excess over $10,700

(that is, to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax”). For example, one of the requirements for the parental election is that a child’s gross income is more than the

.02 Unearned Income of Minor Chil- dren Taxed as if Parent’s Income (the “Kiddie Tax”) . For taxable years beginning in 2008, the amount in § 1(g)(4)(A)(ii)(I), which is used to reduce the net unearned income reported

on the child’s return that is subject to the “kiddie tax,” is $900. This amount is the same as the $900 standard deduction amount provided in section 3.11(2) of this revenue procedure. The same $900 amount is used for purposes of § 1(g)(7)

2007–45 I.R.B. 972 November 5, 2007

arship Credit allowable under § 25A(b)(1) for taxable years beginning in 2008 is $1,800.

(2) For taxable years beginning in 2008, a taxpayer’s modified adjusted gross income in excess of $48,000 ($96,000 for a joint return) is used to determine the reduction under § 25A(d)(2)(A)(ii) in the amount of the Hope Scholarship and Lifetime Learning Credits otherwise allowable under § 25A(a).

.06 Elective Deferrals and IRA Contri- butions by Certain Individuals . For taxable years beginning in 2008, the applicable percentage under § 25B(b) is determined based on the following amounts:

amount referenced in § 1(g)(4)(A)(ii)(I) but less than 10 times that amount; thus, a child’s gross income for 2008 must be more than $900 but less than $9,000.

.03 Adoption Credit . For taxable years beginning in 2008, under § 23(a)(3) the credit allowed for an adoption of a child with special needs is $11,650. For taxable years beginning in 2008, under § 23(b)(1) the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $11,650. The available adoption credit begins to phase out under § 23(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $174,730 and is completely phased out for taxpayers with modified adjusted gross income of $214,730 or more. (See section

3.15 of this revenue procedure for the adjusted items relating to adoption assistance programs.)

.04 Child Tax Credit . For taxable years beginning in 2008, the value used in § 24(d)(1)(B)(i) to determine the amount of credit under § 24 that may be refundable is $12,050.

.05 Hope and Lifetime Learning Cred- its .

(1) For taxable years beginning in 2008, the Hope Scholarship Credit under § 25A(b)(1) is an amount equal to 100 percent of qualified tuition and related expenses not in excess of $1,200 plus 50 percent of those expenses in excess of $1,200, but not in excess of $2,400. Accordingly, the maximum Hope Schol

Modified Adjusted Gross Income

Joint Return Head of Household All Other Cases

Over Not Over Over Not Over Over Not Over

Applicable Percentage

$ 0 $32,000 $ 0 $24,000 $ 0 $16,000 50%

$32,000 $34,500 $24,000 $25,875 $16,000 $17,250 20%

$34,500 $53,000 $25,875 $39,750 $17,250 $26,500 10%

$53,000 $39,750 $26,500 0%

to phase out. The “completed phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) at or above which no credit is allowed.

.07 Earned Income Credit . (1) In general . For taxable years beginning in 2008, the following amounts are used to determine the earned income credit under § 32(b). The “earned income amount” is the amount of earned

income at or above which the maximum amount of the earned income credit is allowed. The “threshold phaseout amount” is the amount of adjusted gross income (or, if greater, earned income) above which the maximum amount of the credit begins

Number of Qualifying Children

Item One Two or More None

Earned Income Amount $ 8,580 $12,060 $ 5,720

Maximum Amount of Credit $ 2,917 $ 4,824 $ 438

Threshold Phaseout Amount (Single, Surviving Spouse, or Head of Household)

Completed Phaseout Amount (Single, Surviving Spouse, or Head of Household)

Threshold Phaseout Amount (Married Filing Jointly)

Completed Phaseout Amount (Married Filing Jointly)

$15,740 $15,740 $ 7,160

$33,995 $38,646 $12,880

$18,740 $18,740 $10,160

$36,995 $41,646 $15,880

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calendar year 2008, an eligible employer may pay certain welders and heavy equipment mechanics an amount of up to $15 per hour for rig-related expenses that is deemed substantiated under an accountable plan if paid in accordance with Rev. Proc. 2002–41. If the employer provides fuel or otherwise reimburses fuel expenses, up to $9 per hour is deemed substantiated if paid under Rev. Proc. 2002–41. .11 Standard Deduction . (1) In general . For taxable years beginning in 2008, the standard deduction amounts under § 63(c)(2) are as follows:

The instructions for the Form 1040 series provide tables showing the amount of the earned income credit for each type of taxpayer.

(2) Excessive investment income . For taxable years beginning in 2008, the earned income tax credit is not allowed under § 32(i) if the aggregate amount of certain investment income exceeds $2,950.

.08 Low-Income Housing Credit . For calendar year 2008, the amount used under § 42(h)(3)(C)(ii) to calculate the State housing credit ceiling for the low-income housing credit is the greater of (1) $2.00

multiplied by the State population, or (2) $2,325,000.

.09 Alternative Minimum Tax Exemp- tion for a Child Subject to the “Kiddie Tax .” For taxable years beginning in 2008, for a child to whom the § 1(g) “kiddie tax” applies, the exemption amount under §§ 55 and 59(j) for purposes of the alternative minimum tax under § 55 may not exceed the sum of (1) the child’s earned income for the taxable year, plus (2) $6,400.

.10 Transportation Mainline Pipeline Construction Industry Optional Expense Substantiation Rules for Payments to Em- ployees under Accountable Plans . For

Filing Status Standard Deduction

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $10,900

Heads of Households (§ 1(b)) $ 8,000

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c))

$ 5,450

Married Individuals Filing Separate Returns (§ 1(d)) $ 5,450

pletely phased out for taxpayers with modified adjusted gross income of $214,730 or more. (See section 3.03 of this revenue procedure for the adjusted items relating to the adoption credit.)

.16 Private Activity Bonds Volume Cap . For calendar year 2008, the amounts used under § 146(d)(1) to calculate the State ceiling for the volume cap for private activity bonds is the greater of (1) $85 multiplied by the State population, or (2) $262,095,000.

.17 General Arbitrage Rebate Rules . For bond years ending in 2008, the amount of the computation credit determined under § 1.148–3(d)(4) of the proposed Income Tax Regulations is $1,430.

.18 Safe Harbor Rules for Broker Commissions on Guaranteed Invest- ment Contracts or Investments Purchased for a Yield Restricted Defeasance Es- crow . For calendar year 2008, under § 1.148–5(e)(2)(iii)(B)( 1 ), a broker’s commission or similar fee for the acquisition of a guaranteed investment contract or investments purchased for a yield restricted defeasance escrow is reasonable if (1) the amount of the fee that the issuer treats as a qualified administrative cost does not exceed the lesser of (A) $34,000, and (B) 0.2 percent of the computational base (as defined in § 1.148–5(e)(2)(iii)(B)( 2 )) or,

(2) Dependent . For taxable years beginning in 2008, the standard deduction amount under § 63(c)(5) for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of (1) $900, or (2) the sum of $300 and the individual’s earned income.

(3) Aged or blind . For taxable years beginning in 2008, the additional standard deduction amount under § 63(f) for the aged or the blind is $1,050. These amounts are increased to $1,350 if the individual is also unmarried and not a surviving spouse.

.12 Overall Limitation on Itemized De- ductions . For taxable years beginning in 2008, the “applicable amount” of adjusted gross income under § 68(b), above which the amount of otherwise allowable itemized deductions is reduced under § 68, is $159,950 (or $79,975 for a separate return filed by a married individual).

.13 Qualified Transportation Fringe . For taxable years beginning in 2008, the monthly limitation under § 132(f)(2)(A), regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass, is $115. The monthly limitation under § 132(f)(2)(B), regarding the fringe benefit exclusion amount for qualified parking, is $220.

.14 Income from United States Savings Bonds for Taxpayers Who Pay Qualified Higher Education Expenses . For taxable years beginning in 2008, the exclusion under § 135, regarding income from United States savings bonds for taxpayers who pay qualified higher education expenses, begins to phase out for modified adjusted gross income above $100,650 for joint returns and $67,100 for other returns. The exclusion is completely phased out for modified adjusted gross income of $130,650 or more for joint returns and $82,100 or more for other returns.

.15 Adoption Assistance Programs . For taxable years beginning in 2008, under § 137(a)(2) the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $11,650. For taxable years beginning in 2008, under § 137(b)(1) the maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $11,650. The amount excludable from an employee’s gross income begins to phase out under § 137(b)(2)(A) for taxpayers with modified adjusted gross income in excess of $174,730 and is com

2007–45 I.R.B. 974 November 5, 2007

maximum phaseout amount is $2,333 for taxable years beginning in 2008.

(2) Phaseout . For taxable years beginning in 2008, the personal exemption amount begins to phase out at, and reaches the maximum phaseout amount after, the following adjusted gross income amounts:

if more, $3,000; and (2) the issuer does not treat more than $95,000 in brokers’ commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue.

Filing Status

.19 Personal Exemption . (1) Exemption amount . For taxable years beginning in 2008, the personal exemption amount under § 151(d) is $3,500. The exemption amount for taxpayers with adjusted gross income in excess of the

AGI – Beginning of Phaseout

AGI – Maximum Phaseout

Married Individuals Filing Joint Returns and Surviving Spouses (§ 1(a)) $239,950 $362,450

Heads of Households (§ 1(b)) $199,950 $322,450

Unmarried Individuals (other than Surviving Spouses and Heads of Households) (§ 1(c))

$159,950 $282,450

Married Individuals Filing Separate Returns (§ 1(d)) $119,975 $181,225

the limitations under § 213(d)(10), regarding eligible long-term care premiums includible in the term “medical care,” are as follows:

.20 Election to Expense Certain Depre- ciable Assets . For taxable years beginning in 2008, under § 179(b)(1) the aggregate cost of any § 179 property a taxpayer may elect to treat as an expense can not exceed $128,000. Under § 179(b)(2), the

$128,000 limitation is reduced (but not below zero) by the amount by which the cost of § 179 property placed in service during the 2008 taxable year exceeds $510,000.

.21 Eligible Long-Term Care Premi- ums . For taxable years beginning in 2008,

Attained Age Before the Close of the Taxable Year Limitation on Premiums

40 or less $ 310 More than 40 but not more than 50 $ 580 More than 50 but not more than 60 $1,150 More than 60 but not more than 70 $3,080 More than 70 $3,850

with modified adjusted gross income of $70,000 or more ($145,000 or more for joint returns).

.25 Roth IRAs . (1) For taxable years beginning in 2008, the applicable dollar amount under § 408A(c)(3)(C)(ii)(I) for taxpayers filing a joint return is $159,000.

(2) For taxable years beginning in 2008, the applicable dollar amount under § 408A(c)(3)(C)(ii)(II) for all other taxpayers (except for married taxpayers filing separately) is $101,000.

(3) The applicable dollar amount under § 408A(c)(3)(C)(ii)(III) for married taxpayers filing separately is $0.

.26 Treatment of Dues Paid to Agricul- tural or Horticultural Organizations . For taxable years beginning in 2008, the limitation under § 512(d)(1), regarding the exemption of annual dues required to be paid by a member to an agricultural or horticultural organization, is $139.

.22 Retirement Savings. (1) For taxable years beginning in 2008, the applicable dollar amount under § 219(g)(3)(B)(i) for taxpayers filing a joint return is $85,000. If the taxpayer’s spouse is not an active participant, the applicable dollar amount for the spouse under § 219(g)(3)(B)(i) is $159,000 for taxable years beginning in 2008.

(2) For taxable years beginning in 2008, the applicable dollar amount under § 219(g)(3)(B)(ii) for all other taxpayers (except for married taxpayers filing separately) is $53,000.

(3) The applicable dollar amount under § 219(g)(3)(B)(iii) for married taxpayers filing separately is $0.

.23 Medical Savings Accounts . (1) Self-only coverage . For taxable years beginning in 2008, the term “high deductible health plan” as defined in § 220(c)(2)(A) means, for self-only coverage, a health plan that has an annual

deductible that is not less than $1,950 and not more than $2,900, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $3,850.

(2) Family coverage . For taxable years beginning in 2008, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $3,850 and not more than $5,800, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits does not exceed $7,050.

.24 Interest on Education Loans . For taxable years beginning in 2008, the $2,500 maximum deduction for interest paid on qualified education loans under § 221 begins to phase out under § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $55,000 ($115,000 for joint returns), and is completely phased out for taxpayers

November 5, 2007 975 2007–45 I.R.B.

attorney fee award limitation under § 7430(c)(1)(B)(iii) is $170 per hour.

.40 Periodic Payments Received un- der Qualified Long-Term Care Insurance Contracts or under Certain Life Insur- ance Contracts . For calendar year 2008, the stated dollar amount of the per diem limitation under § 7702B(d)(4), regarding periodic payments received under a qualified long-term care insurance contract or periodic payments received under a life insurance contract that are treated as paid by reason of the death of a chronically ill individual, is $270.