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IRS announces inflation adjustments for 2008

(October 19, 2007) - The Internal Revenue Service has issued Rev. Proc. 2007-66 containing inflation adjustments for various tax items for 2008.

The adjustments affecting families incurring college costs, or saving for college, included the following:

- The amount of income excluded from a child's kiddie tax computation is increased from $1,700 to $1,800. The first $900 is the untaxed standard deduction amount, and the next $900 is taxed at the child's 10% bracket.

- The maximum Hope credit increases from $1,650 to $1,800, consisting of 100% of the first $1,200 of qualifying tuition and 50% of the next $1,200 of qualifying tuition.

- The income phase-out for the Hope credit and the Lifetime Learning credit is increased to begin at $48,000 and be fully phased out at $58,000 ($96,000 to $116,000 for a joint return).

- The income phase-out for the education savings bond exclusion is increased to begin at $67,100 and be fully phased out at $82,100 ($100,650 to $130,650 for a joint return).

- The income phase-out for the deduction of interest on education loans is increased to begin at $55,000 and be fully phased out at $70,000 ($115,000 to $145,000 for a joint return).

- The gift tax annual exclusion remains at $12,000.

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