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This section summarizes important changes that could affect your estimated tax payments for 2008.
Work opportunity tax credit. The work opportunity tax credit has been modified and extended through August 31, 2011. See Publication 954, Tax Incentives for Distressed Communities, for more information.
Personal exemption and itemized deduction phaseout. The amount by which these deductions are reduced in 2008 will be one-half of the reduction that applied in 2007. These reductions are reflected in Worksheets 2 and 3.
Capital gain tax rate reduced. The 5% capital gain tax rate is reduced to zero. This is reflected in Worksheet 5.
Clean renewable energy bonds. The credit for clean renewable energy bonds has been extended to bonds issued before December 31, 2008.
Forgiveness of mortgage debt. A law was just passed that may allow you to exclude from income part or all of the mortgage debt forgiven on your principal residence. This applies for debt forgiven in 2007 through 2009. See Publication 553, Highlights of 2007 Tax Changes, for more details.
Volunteer firefighters and emergency medical responders. Certain qualified payments and other state and local tax benefits are not included in taxable income. For more information, see Publication 553.
Insurance premiums for retired public safety officers. Beginning in 2007, if you are an eligible retired public safety officer, you may be able to exclude from your income the amount paid for certain insurance premiums. See Insurance Premiums for Retired Public Safety Officers, later.
Credit or exclusion for adoption benefits increased. The maximum adoption credit has increased to $11,650. The maximum exclusion from income for benefits received under an employer's adoption assistance program has increased to $11,650. These amounts are phased out if your modified adjusted gross income (AGI) is between $174,730 and $214,730. You cannot claim the credit or exclusion if your modified AGI is $214,730 or more.
Special rule for sales of principal residences by surviving spouses. A surviving spouse who sells his or her principal residence within 2 years after the spouse's date of death may be allowed to exclude up to $500,000 of qualified gain instead of $250,000. See Publication 553 for more information.
Earned income credit (EIC). You may be able to take the EIC if:
The maximum investment income you can have and still get the credit has increased to $2,950. For more information, see Publication 596, Earned income Credit (EIC).
Retirement savings plans. The following paragraphs highlight changes that affect individual retirement arrangements (IRAs) and pension plans. For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Traditional IRA deduction limits increased. You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if age 50 or older at the end of the year). You may be able to take an IRA deduction if you were covered by a retirement plan at work and your 2008 modified adjusted gross income (AGI) is less than $63,000 ($105,000 if married filing jointly or a qualifying widow(er)). Retirement savings contributions credit. For 2008, you may be able to claim this credit if your modified AGI is not more than $26,500 ($53,000 if married filing jointly, $39,750 if head of household).
Standard mileage rates. Beginning in 2008, the standard mileage rate for the cost of operating your car is:
Tax on child's investment income. Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800.
The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251, Alternative Minimum Tax—Individuals, also will apply to the children listed above.
Extended Tax Benefits.
Expired Tax Benefits. Legislation during 2008 may extend one or more of the following benefits. For the latest information, go to www.irs.gov, and click on More Forms and Publications, and then on What's Hot in forms and publications.
The following tax benefits expired and, unless extended, will not apply for 2008.
The federal income tax is a pay-as-you-go tax. This means you must pay the tax as you earn or receive income during the year.
As a wage earner, you pay federal income tax by having it withheld from your pay during the year. This is your “withholding.” Your withholding is based on the number of allowances you claim when you file Form W-4, Employee's Withholding Allowance Certificate, with your employer.
The purpose of this publication is to help you check your withholding and, if necessary, prepare Form W-4 to adjust your withholding. When you first begin a job, you must complete a Form W-4 and give it to your employer to establish your initial withholding. You can adjust your withholding by giving a new Form W-4 to your employer at any time.
If you have not changed jobs, you do not have to give your employer a new Form W-4 each year unless you need to adjust your withholding. For more detailed information about Form W-4, see chapter 1 of Publication 505, Tax Withholding and Estimated Tax.
This section explains why, when, and how to check your withholding to see if you will have enough, but not too much, tax withheld for 2008. Also, you may want to use the withholding calculator on www.irs.gov.
You should try to have your withholding match your actual tax liability. If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. If too much tax is withheld, you will lose the use of that money until you get your refund.
Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. See Figure 1 for examples.
| Factor | Examples |
| Lifestyle change | Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement |
| Wage income | You or your spouse start or stop working, or start or stop a second job |
| Increased or decreased income not subject to withholding | Interest income Dividends Capital gains Self-employment income IRA (including Roth IRA) distributions |
| Increased or decreased adjustments to income | IRA deduction Student loan interest deduction Alimony expense |
| Increased or decreased itemized deductions or tax credits | Medical expenses Taxes Interest expense Gifts to charity Job expenses Education credit Child tax credit |
The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld.
You should check your withholding when any of the following situations occur.
If there are tax law changes that increase your tax for 2008 and you do not increase your withholding, you may have to pay tax when you file your return. If there are changes that decrease your tax for 2008 and you do not decrease your withholding, you may get a larger refund. You can get this money back earlier by reducing your withholding.
For information about changes in the law for 2007 and 2008, get Publication 553, Highlights of 2007 Tax Changes, or visit the IRS website at www.irs.gov. Click on More Forms and Publications, and then on What's Hot in forms and publications.
You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld.
Follow these steps.
If you are not having enough tax withheld, line 6 of Worksheet 9 will show you how much more to have withheld each payday.
If you are having more tax withheld than necessary, line 5 of Worksheet 9 refers you to How Do I Decrease My Withholding.
If not enough tax will be withheld, you should give your employer a new Form W-4 showing either a reduced number of withholding allowances or an additional amount to be withheld from your pay. See How Do I Increase My Withholding, on page 5.
There is a good chance you are not having enough tax withheld if:
If your employer cannot withhold enough additional tax from your pay, you may need to make estimated tax payments. This might be the case if your pay is low and you have substantial nonwage income, such as interest, dividends, capital gains, or earnings from self-employment. For more information on estimated tax payments, see chapter 2 of Publication 505.
If too much tax is withheld, you may receive a large refund when you file your return. If you would prefer to receive the money during the year, you should see if you qualify to have less tax withheld. If so, give your employer a new Form W-4 showing more withholding allowances.
There is a good chance you are having too much tax withheld if:
Adjustments to income are listed on Form 1040 and Form 1040A near the bottom of page 1. Itemized deductions appear on Schedule A (Form 1040). Credits appear on page 2 of Form 1040 and Form 1040A. See also Figures 1 (page 4) and 2 (page 6).
This section explains how to adjust your withholding.
If you are not having enough tax withheld or you are having too much tax withheld, you should either increase or decrease your withholding.
You increase or decrease your withholding by filling out a new Form W-4 and giving it to your employer. You can use the worksheets and information in this publication to help you complete Form W-4. You can get a blank Form W-4 from your employer or use the Form W-4 on pages 9 and 10 of this publication.
There are two ways to increase your withholding. You can:
You can request that an additional amount be withheld from each paycheck by following these steps.
Early in 2008, Steve Miller used Worksheets 1, 4, and 9 to project his 2008 tax liability ($4,316) and his withholding for the year ($3,516). Steve's tax will be under withheld by $800 ($4,316 - $3,516). Either he will have to pay this amount when he files his 2008 tax return or he can increase his withholding now. Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2008. Steve completes the form as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on line 6 of the form. This is the additional amount to be withheld from his pay each payday. He gives the completed form to his employer.
Meg Green works in a store and earns $46,000 a year. Her husband, John, works full-time in manufacturing and earns $68,000 a year. In 2008, they will also have $184 in taxable interest and $1,000 of other taxable income. They expect to file a joint income tax return. Meg and John complete Worksheets 1, 4, and 9. Worksheet 9, line 5, shows that they will owe an additional $4,459 after subtracting their withholding for the year. They can divide the $4,459 any way they want. They can enter an additional amount on either of their Forms W-4, or divide it between them. They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on line 6 of his Form W-4. Both claim the same number of allowances as before.
If your completed Worksheets 1 and 9 show that you may have more tax withheld than your projected tax liability for 2008, you may be able to decrease your withholding. There are two ways to do this. You can:
You figure and increase the number of withholding allowances you are entitled to claim as follows.
Figure 2, on page 6, shows many of the tax credits you may be able to use to reduce your withholding. The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit (line F) and the child tax credit (line G). Complete Worksheet 8 (see page 18) to figure these credits more accurately and also take other credits into account.
Include the amount from line 12 of Worksheet 8 in the total on line 5 of the Deductions and Adjustments Worksheet. Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4.
If you take the child and dependent care credit into account on Worksheet 8, enter -0- on line F of the Personal Allowances Worksheet. If you take the child tax credit into account on Worksheet 8, enter -0- on line G of the Personal Allowances Worksheet.| For more information about the ... | See ... |
| Adoption credit | Form 8839 instructions |
| Alternative fuel vehicle refueling property credit | Form 8911 instructions |
| Alternative motor vehicle credit | Form 8910 instructions |
| Child and dependent care expenses, credit for | Publication 503, Child and Dependent Care Expenses |
| Child tax credit (including additional child tax credit) | Instructions for Form 1040 or Form 1040A |
| Clean renewable energy bond credit | Form 8912 instructions |
| District of Columbia first-time homebuyer credit carryforward from 2007 | Form 8859 instructions |
| Earned income credit (unless you requested advance payment of the credit) | Publication 596, Earned Income Credit |
| Education credits | Publication 970, Tax Benefits for Education |
| Elderly or the disabled, credit for the | Publication 524, Credit for the Elderly or the Disabled |
| Foreign tax credit (except any credit that applies to wages not subject to U.S. income tax withholding because they are subject to income tax withholding by a foreign country) | Publication 514, Foreign Tax Credit for Individuals |
| General business credit | Form 3800, General Business Credit |
| Gulf tax credit bond credit | Form 8912 instructions |
| Health coverage tax credit | Publication 502, Medical and Dental Expenses |
| Mortgage interest credit | Publication 530, Tax Information for First-Time Homeowners |
| Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) | Form 8801 instructions |
| Qualified zone academy bond credit | Form 8860 instructions |
| Residential energy efficient property credit | Form 5695 instructions |
| Retirement savings contributions credit | Publication 590, Individual Retirement Arrangements (IRAs) |
Brett and Alyssa Davis are married and expect to file a joint return for 2008. Their estimated income from all sources is $68,000. They also expect to have $15,900 of itemized deductions. Their projected tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700.
The Davis' complete Worksheet 8, as follows, to see whether they can convert their tax credits into additional withholding allowances.
Then the Davis' complete the Form W-4 worksheets.
If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4.
If the change is for next year, your new Form W-4 will not take effect until next year.
Generally, the amount your employer withholds for federal income tax must be based on your Form W-4. However, whether you are entitled to claim exempt status or a certain number of withholding allowances is subject to review by the IRS. If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer.
If you receive a lock-in letter, the IRS has instructed your employer to begin withholding income tax from your wages based on the withholding rate and allowances shown in the letter. In addition, your employer has been instructed not to honor your current Form W-4 or a new Form W-4 unless it results in more withholding than the lock-in letter allows.
The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Follow the instructions in your letter if you wish to submit a new Form W-4 or contact the Withholding Compliance Unit with questions. Additional information is available on the IRS website at www.irs.gov. Enter the keyword “withholding compliance questions” in the search box.
When you first began receiving your pension, you told the payor how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or something similar). However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. You completed either form based on your projected income at that time. Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income.
The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Start off with the Personal Allowances Worksheet. Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet.
The third worksheet is the most important for this situation. Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. As you have learned in this publication, if you have more than one source of income you may need to claim fewer withholding allowances, or request your employer withhold an additional amount from each paycheck, to have enough withholding to cover the tax on your higher income.
Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. It is your decision how to divide up your withholding allowances between these sources of income. For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your pension to “pay the bills.” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4.
There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances.
And remember, this is not a final decision. If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above.
You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. You may need more tax withheld, or you may need less.
If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. The premiums can be for coverage for you, your spouse, or dependents. The distribution must be made directly from the plan to the insurance provider. You can exclude from income the smaller of the amount of the insurance premiums or $3,000. You can only make this election for amounts that would otherwise be included in your income.
An eligible retirement plan is a governmental plan that is:
If you wish to make the election, see the instructions for Form 1040.
Use the following worksheets and tables to figure your correct withholding and adjustments.
| Use ... | On page... | To ... |
| Worksheet 1 Projected Tax for 2008 | 12 | Project the taxable income you will have for 2008 and figure the amount of tax you will have to pay on that income. |
| Worksheet 2 Phaseout of Itemized Deductions for 2008 | 13 | Figure the reduced amount of your projected itemized deductions on Schedule A (Form 1040) if they are limited because your projected adjusted gross income is more than $159,950 ($79,975 if married filing separately). |
| Worksheet 3 Reduction of Exemption Amount for 2008 | 13 | Figure the reduced amount of your projected exemptions if your exemptions are limited because your projected adjusted gross income for your projected filing status is more than: $159,950 if single; $239,950 if married filing jointly or qualifying widow(er); $119,975 if married filing separately; or $199,950 if head of household. |
| Worksheet 4 Tax Computation Worksheets for 2008 | 14-15 | Figure the amount of tax on your projected taxable income. |
| Worksheet 5 Figuring 2008 Tax if You Expect to Have a Net Capital Gain or Qualified Dividends | 16 | Figure the amount of tax when your projected 2008 taxable income includes a net capital gain or qualified dividends. |
| Worksheet 6 Figuring 2008 Tax if You Expect to Exclude Foreign Earned Income or Housing Amount | 17 | Figure your tax if you expect to claim a foreign earned income exclusion or housing exclusion on Form 2555 or Form 2555-EZ. |
| Worksheet 7 Self-Employment Tax for 2008 | 17 | Figure your projected self-employment tax for 2008 if you and/or your spouse are self-employed in 2008 and the total of your (or your spouse's) wages and self-employment income will be more than $102,000. |
| Worksheet 8 Converting Credits to Withholding Allowances for 2008 Form W-4 | 18 | Figure how much of an adjustment to make to line 5 of the Form W-4 Deductions and Adjustments Worksheet to account for your projected tax credits that are not otherwise taken into consideration. |
| Worksheet 9 Projected Withholding for 2008 | 19 | Project the amount of federal income tax that you will have withheld in 2008, compare your projected withholding with your projected tax, and determine whether the amount withheld each payday should be adjusted. |
| Tables 1, 2, and 3 2008 Standard Deduction Tables | 20 | Determine your projected standard deduction for 2008. Do not use these tables if you plan to itemize your deductions. |
| Use this worksheet to figure the amount of your projected tax for 2008. Note. Enter combined amounts if married filing jointly. | ||||||
| 1. | Enter amount of adjusted gross income (AGI) you expect in 2008. (To determine this, you may want to start with the AGI on your last year's return, and add or subtract your expected changes.) | |||||
| Note. If self-employed, first complete Worksheet 7 to figure the deduction for one-half of self-employment tax. Subtract that amount to figure the line 1 entry. | 1 | |||||
| 2. | If you: | |||||
| • | Do not plan to itemize deductions on Schedule A (Form 1040), enter your expected standard deduction from Table 1, 2, or 3 (see page 20). | |||||
| • | Plan to itemize deductions, and the amount on line 1 is: | |||||
| • | Not more than $159,950 ($79,975 if married filing separately), enter the total itemized deductions you expect after applying any limits (such as the 7.5% limit on medical expenses). | |||||
| • | More than $159,950 ($79,975 if married filing separately), use Worksheet 2 to figure the amount to enter here | 2 | ||||
| 3. | Subtract line 2 from line 1 (if zero or less, enter -0- and go to line 6) | 3 | ||||
| 4. | If the amount on line 1 is: | |||||
| • | Not more than the amount shown below for your 2008 filing status, multiply the number of exemptions you plan to claim on your 2008 tax return by $3,500 and enter the result here. | 4 | ||||
| • | More than the amount shown below for your 2008 filing status, use Worksheet 3 to figure the amount to enter here | |||||
| • | Single — $159,950 | |||||
| • | Married filing jointly or Qualifying widow(er) — $239,950 | |||||
| • | Married filing separately — $119,975 | |||||
| • | Head of household — $199,950 | |||||
| 5. | Expected taxable income. Subtract line 4 from line 3 (if zero or less, enter -0-) | 5 | ||||
| 6. | If the amount on line 1: | |||||
| • | Does not include a net capital gain or qualified dividends and you did not exclude foreign earned income or housing amounts in arriving at the amount on line 1, use the appropriate section of Worksheet 4 (see pages 14-15) to figure the tax to enter here. | |||||
| • | Includes a net capital gain or qualified dividends, use Worksheet 5 (see page 16) to figure the tax to enter here | |||||
| • | Was figured by excluding foreign earned income or housing, use Worksheet 6 (see page 17) to figure the tax to enter here | 6 | ||||
| 7. | Enter any expected additional taxes from an election to report your child's interest and dividends (Form 8814); lump-sum distributions (Form 4972); and any recapture of education credits | 7 | ||||
| 8. | Add lines 6 and 7 | 8 | ||||
| 9. | Enter the amount of any expected tax credits. See Figure 2 on page 6 | 9 | ||||
| 10. | Subtract line 9 from line 8 (if zero or less, enter -0-) | 10 | ||||
| 11. | Self-employment tax. If you expect to file a joint return and both of you are self-employed, figure the self-employment tax for each of you separately and enter the total on line 11. If the projected total of your net self-employment income multiplied by 92.35% (.9235) is: | |||||
| • | less than $400, enter -0- on line 11 | |||||
| • | $400 or more, and together with your wages is not more than $102,000, multiply your expected net self-employment income by 92.35% (.9235). Multiply that result by 15.3% (.153) and enter here. | |||||
| • | $400 or more, and together with your wages is more than $102,000, use Worksheet 7 (see page 17) to figure the amount to enter here | 11 | ||||
| 12. | Enter any other expected taxes (such as tax on early distributions from an IRA, alternative minimum tax, etc.) | 12 | ||||
| 13. | Projected tax for 2008. Add lines 10 through 12. Enter the total here and on Worksheet 9, line 1 | 13 | ||||
| Use this worksheet to figure the amount to enter on Worksheet 1, line 2, and on the Form W-4 Deductions and Adjustments Worksheet, line 1. | ||||
| 1. | Enter the total itemized deductions you expect for 2008 after applying any limits (such as the 7.5% limit on medical expenses) | 1 | ||
| 2. | Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty and theft losses, and gambling losses (after applying the same limits used in line 1) | 2 | ||
| 3. | Subtract line 2 from line 1 | 3 | ||
| Note. If the amount on line 3 is zero, stop here. Your deduction is not limited. Enter on Worksheet 1, line 2, the larger of the amount from line 1 of this worksheet or your standard deduction from Table 1, 2, or 3. | ||||
| 4. | Multiply line 3 by 80% (.80) | 4 | ||
| 5. | Enter the amount from Worksheet 1, line 1 | 5 | ||
| 6. | Enter $159,950 ($79,975 if married filing separately) | 6 | ||
| 7. | Subtract line 6 from line 5 | 7 | ||
| Note. If the amount on line 7 is zero or less, stop here. Your deduction is not limited. Enter on Worksheet 1, line 2, the larger of the amount from line 1 of this worksheet or your standard deduction from Table 1, 2, or 3. | ||||
| 8. | Multiply line 7 by 3% (.03) | 8 | ||
| 9. | Enter the smaller of line 4 or line 8 | 9 | ||
| 10. | Divide line 9 by 1.5 | 10 | ||
| 11. | Subtract line 10 from line 9 | 11 | ||
| 12. | Subtract line 11 from line 1. Enter the result here, on line 2 of Worksheet 1, and on line 1 of the Form W-4 Deductions and Adjustments Worksheet | 12 | ||
| Use this worksheet to figure the amount to enter on Worksheet 1, line 4. | |||||
| 1. | Multiply $3,500 by the number of exemptions you plan to claim | 1 | |||
| 2. | Enter the amount from Worksheet 1, line 1 | 2 | |||
| 3. | Enter: | ||||
| $159,950 if single | |||||
| $239,950 if married filing jointly or qualifying widow(er) | |||||
| $119,975 if married filing separately | |||||
| $199,950 if head of household | 3 | ||||
| 4. | Subtract line 3 from line 2 and enter here | 4 | |||
| 5. | Is line 4 more than $122,500 (more than $61,250 if married filing separately)? | ||||
| Yes. Multiply $2,333 by the number of exemptions you plan to claim and enter the result here and on Worksheet 1, line 4. Do not complete the rest of this worksheet. | |||||
| No. Divide line 4 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, increase it to the next whole number (for example, increase 0.0004 to 1) | 5 | ||||
| 6. | Multiply line 5 by 2% (.02). Enter the result as a decimal | 6 | . | ||
| 7. | Multiply line 1 by line 6 | 7 | |||
| 8. | Divide line 7 by 3.0 | 8 | |||
| 9. | Subtract line 8 from line 1. Enter the result here and on Worksheet 1, line 4 | 9 | |||
Note. If you are required to use this worksheet to figure the tax on an amount from Worksheet 5 (line 1 or 14), or Worksheet 6 (line 2 or 3), enter the amount from that worksheet in column (a) of the row that applies to the amount you are looking up. Enter the result on the appropriate line of the worksheet you are completing.
| Use this worksheet to figure the amount to enter on Worksheet 1, line 6, if you expect your filing status for 2008 to be Single. | ||||||
| Expected Taxable Income | (a) Enter amount from Worksheet 1, line 5* | (b) Multiplication amount | (c) Multiply (a) by (b) | (d) Subtraction amount | (e) Subtract (d) from (c). Enter the result here and on Worksheet 1, line 6* | |
| If Worksheet 1, line 5* is — | ||||||
| Over | But not over | |||||
| $0 | $8,025 | × 10% (.10) | $0 | |||
| 8,025 | 32,550 | × 15% (.15) | 401.25 | |||
| 32,550 | 78,850 | × 25% (.25) | 3,656.25 | |||
| 78,850 | 164,550 | × 28% (.28) | 6,021.75 | |||
| 164,550 | 357,700 | × 33% (.33) | 14,249.25 | |||
| 357,700 | - - - - - | × 35% (.35) | 21,403.25 | |||
| * If you are using Worksheet 5, for column (a), use the amount from line 1 or line 14 and enter the result (from column (e)) on line 29 or line 31, as appropriate. If you are using Worksheet 6, for column (a), use the amount from line 2 or line 3 and enter the result (from column (e)) on line 5 or line 4, as appropriate. |
| Use this worksheet to figure the amount to enter on Worksheet 1, line 6, if you expect your filing status for 2008 to be Head of Household. | ||||||
| Expected Taxable Income | (a) Enter amount from Worksheet 1, line 5* | (b) Multiplication amount | (c) Multiply (a) by (b) | (d) Subtraction amount | (e) Subtract (d) from (c). Enter the result here and on Worksheet 1, line 6* | |
| If Worksheet 1, line 5* is — | ||||||
| Over | But not over | |||||
| $0 | $11,450 | × 10% (.10) | $0 | |||
| 11,450 | 43,650 | × 15% (.15) | 572.50 | |||
| 43,650 | 112,650 | × 25% (.25) | 4,937.50 | |||
| 112,650 | 182,400 | × 28% (.28) | 8,317.00 | |||
| 182,400 | 357,700 | × 33% (.33) | 17,437.00 | |||
| 357,700 | - - - - - | × 35% (.35) | 24,591.00 | |||
| * If you are using Worksheet 5, for column (a), use the amount from line 1 or line 14 and enter the result (from column (e)) on line 29 or line 31, as appropriate. If you are using Worksheet 6, for column (a), use the amount from line 2 or line 3 and enter the result (from column (e)) on line 5 or line 4, as appropriate. |
| Use this worksheet to figure the amount to enter on Worksheet 1, line 6, if you expect your filing status for 2008 to be Married Filing Jointly or Qualifying Widow(er). | ||||||
| Expected Taxable Income | (a) Enter amount from Worksheet 1, line 5* | (b) Multiplication amount | (c) Multiply (a) by (b) | (d) Subtraction amount | (e) Subtract (d) from (c). Enter the result here and on Worksheet 1, line 6* | |
| If Worksheet 1, line 5* is — | ||||||
| Over | But not over | |||||
| $0 | $16,050 | × 10% (.10) | $0 | |||
| 16,050 | 65,100 | × 15% (.15) | 802.50 | |||
| 65,100 | 131,450 | × 25% (.25) | 7,312.50 | |||
| 131,450 | 200,300 | × 28% (.28) | 11,256.00 | |||
| 200,300 | 357,700 | × 33% (.33) | 21,271.00 | |||
| 357,700 | - - - - - | × 35% (.35) | 28,425.00 | |||
| * If you are using Worksheet 5, for column (a), use the amount from line 1 or line 14 and enter the result (from column (e)) on line 29 or line 31, as appropriate. If you are using Worksheet 6, for column (a), use the amount from line 2 or line 3 and enter the result (from column (e)) on line 5 or line 4, as appropriate. |
| Use this worksheet to figure the amount to enter on Worksheet 1, line 6, if you expect your filing status for 2008 to be Married Filing Separately. | ||||||
| Expected Taxable Income | (a) Enter amount from Worksheet 1, line 5* | (b) Multiplication amount | (c) Multiply (a) by (b) | (d) Subtraction amount | (e) Subtract (d) from (c). Enter the result here and on Worksheet 1, line 6* | |
| If Worksheet 1, line 5* is — | ||||||
| Over | But not over | |||||
| $0 | $8,025 | × 10% (.10) | $0 | |||
| 8,025 | 32,550 | × 15% (.15) | 401.25 | |||
| 32,550 | 65,725 | × 25% (.25) | 3,656.25 | |||
| 65,725 | 100,150 | × 28% (.28) | 5,628.00 | |||
| 100,150 | 178,850 | × 33% (.33) | 10,635.50 | |||
| 178,850 | - - - - - | × 35% (.35) | 14,212.50 | |||
| * If you are using Worksheet 5, for column (a), use the amount from line 1 or line 14 and enter the result (from column (e)) on line 29 or line 31, as appropriate. If you are using Worksheet 6, for column (a), use the amount from line 2 or line 3 and enter the result (from column (e)) on line 5 or line 4, as appropriate. |
| Only use this worksheet to figure the amount to enter on Worksheet 1, line 6, if the amount on line 1 of that worksheet includes a net capital gain or qualified dividends. | ||||||||
| 1. | Enter the amount from Worksheet 1, line 5 (or the amount from Worksheet 6, line 7, if appropriate) | 1 | ||||||
| 2. | Enter your expected qualified dividends for 2008 1 | 2 | ||||||
| 3. | Enter the net capital gain expected for 2008 1 | 3 | ||||||
| 4. | Add lines 2 and 3 | 4 | ||||||
| 5. | Enter your 28% rate gain or loss expected for 2008 2 | 5 | ||||||
| 6. | Enter the unrecaptured section 1250 gain expected for 2008 | 6 | ||||||
| 7. | Add lines 5 and 6 | 7 | ||||||
| 8. | Enter the smaller of line 3 or line 7 | 8 | ||||||
| 9. | Subtract line 8 from line 4 | 9 | ||||||
| 10. | Subtract line 9 from line 1. If zero or less, enter -0- | 10 | ||||||
| 11. | Enter the smaller of line 1 or $65,100 ($32,550 if single or married filing separately; $43,650 if head of household) | 11 | ||||||
| 12. | Enter the smaller of line 10 or line 11 | 12 | ||||||
| 13. | Subtract line 4 from line 1. If zero or less, enter -0- | 13 | ||||||
| 14. | Enter the larger of line 12 or line 13. Note. If line 11 and line 12 are the same, skip line 15 and go on to line 16 | 14 | ||||||
| 15. | Subtract line 12 from line 11 Note. If lines 1 and 11 are the same, skip lines 16-28 and go to line 29 | 15 | ||||||
| 16. | Enter the smaller of line 1 or line 9 | 16 | ||||||
| 17. | Enter the amount from line 15. If line 15 is blank, enter -0- | 17 | ||||||
| 18. | Subtract line 17 from line 16. If zero or less, enter -0- | 18 | ||||||
| 19. | Multiply line 18 by 15% (.15). Note. If line 6 is zero or blank, skip lines 20-25 and go to line 26 | 19 | ||||||
| 20. | Enter the smaller of line 3 or line 6 | 20 | ||||||
| 21. | Add lines 4 and 14 | 21 | ||||||
| 22. | Subtract line 1 from line 21. If zero or less, enter -0- | 22 | ||||||
| 23. | Subtract line 22 from line 20. If zero or less, enter -0- | 23 | ||||||
| 24. | Multiply line 23 by 25% (.25). Note. If line 5 is zero or blank, skip lines 25-27 and go to line 28 | 24 | ||||||
| 25. | Add lines 14, 15, 18, and 23 | 25 | ||||||
| 26. | Subtract line 25 from line 1 | 26 | ||||||
| 27. | Multiply line 26 by 28% (.28) | 27 | ||||||
| 28. | Figure the tax on the amount on line 14 using Worksheet 4 | 28 | ||||||
| 29. | Add lines 19, 24, 27, and 28 | 29 | ||||||
| 30. | Figure the tax on the amount on line 1 using Worksheet 4 | 30 | ||||||
| 31. | Expected tax on all taxable income (including capital gains and qualified dividends). Enter the smaller of line 29 or line 30 here and on Worksheet 1, line 6 (or if using Worksheet 6, enter on line 4 of Worksheet 6) | 31 | ||||||
| 1 If you expect to deduct investment interest expense, do not include on this line any qualified dividends or net capital gain that you will elect to treat as investment income. | ||||||||
| 2 This includes a section 1202 exclusion from eligible gain on qualified small business stock and gain or loss from the sale or exchange of collectibles. See the instructions for Schedule D (Form 1040) for more information. | ||||||||
You must figure your tax using this worksheet if you claim a foreign earned income exclusion or housing exclusion on Form 2555 or
Form 2555-EZ.
| Before you begin: If Worksheet 1, line 5, is zero, do not complete this worksheet. | ||||||||||||
| 1. | Enter the amount from Worksheet 1, line 5 | 1 | ||||||||||
| 2. | Enter the total foreign earned income and housing amount you (and your spouse, if filing jointly) expect to exclude in 2008 on Form 2555, line 43, or Form 2555-EZ, line 18 | 2 | ||||||||||
| 3. | Add lines 1 and 2 | 3 | ||||||||||
| 4. | Tax on the amount on line 3. Use Worksheet 4 or Worksheet 5,* as appropriate | 4 | ||||||||||
| 5. | Tax on the amount on line 2. Use Worksheet 4 | 5 | ||||||||||
| 6. | Subtract line 5 from line 4. Enter the result here and on Worksheet 1, line 6. If zero or less, enter -0- | 6 | ||||||||||
| *If using Worksheet 5 (Figuring 2008 Tax if You Expect to Have a Net Capital Gain or Qualified Dividends), enter the amount from line 3 above on line 1 of Worksheet 5. Complete Worksheet 5 through line 9. Next, determine if you have a capital gain excess. | ||||||||||||
| Figuring capital gain excess. To find out if you have a capital gain excess, subtract line 5 of Worksheet 1 from line 9 of Worksheet 5. If the result is more than zero, that amount is your capital gain excess. | ||||||||||||
| No capital gain excess. If you do not have a capital gain excess, complete the rest of Worksheet 5 according to its instructions. Then complete lines 5 and 6 above. | ||||||||||||
| Capital gain excess. If you have a capital gain excess, complete a second Worksheet 5 in its entirety with the following modifications. Enter the amount from line 3 above on line 1 of Worksheet 5. Then complete lines 5 and 6 above. Make these modifications to Worksheet 5 only for purposes of filling out Worksheet 6 above. | ||||||||||||
| a. Reduce the amount you would otherwise enter on line 3 of Worksheet 5 (but not below zero) by your capital gain excess. | ||||||||||||
| b. Reduce the amount you would otherwise enter on line 2 of Worksheet 5 (but not below zero) by any of your capital gain excess not used in (a) above. | ||||||||||||
| c. Reduce the amount you would otherwise enter on line 5 of Worksheet 5 (but not below zero) by your capital gain excess. | ||||||||||||
| d. Reduce the amount you would otherwise enter on line 6 of Worksheet 5 (but not below zero) by your capital gain excess. | ||||||||||||
| Use this worksheet to figure the amount to enter on Worksheet 1, line 11. If you are married filing a joint return and you are both self-employed, complete this worksheet separately for each spouse, and combine the amounts on Worksheet 1, line 11. | |||||
| 1. | Enter your expected net self-employment income for 2008 | 1 | |||
| 2. | Multiply line 1 by 92.35% (.9235) | 2 | |||
| 3. | Multiply line 2 by 2.9% (.029) | 3 | |||
| 4. | Social security tax maximum income | 4 | $102,000 | ||
| 5. | Enter your expected wages for 2008 (if subject to social security tax or the 6.2% portion of tier 1 railroad retirement tax) | 5 | |||
| 6. | Subtract line 5 from line 4 | 6 | |||
| Note. If line 6 is zero or less, enter -0- on line 8 and skip to line 9. | |||||
| 7. | Enter the smaller of line 2 or line 6 | 7 | |||
| 8. | Multiply line 7 by 12.4% (.124) | 8 | |||
| 9. | Add line 3 and line 8. Enter the result here and on Worksheet 1, line 11. If you expect to file a joint return, combine the result with your spouse's expected self-employment tax and enter the total on Worksheet 1, line 11 | 9 | |||
| 10. | Multiply line 9 by .50. This is your expected deduction for one-half of your self-employment tax. Subtract this amount when figuring your expected AGI on line 1 of Worksheet 1 | ||||
10 | |||||
| Use this worksheet to figure an additional amount to enter on the Form W-4 Deductions and Allowances Worksheet, line 5. For more information on these credits, see Converting Credits to Withholding Allowances, earlier. | ||||||||||||
| Caution. If you enter an amount on line 1 of this worksheet, enter -0- on line F of the Form W-4 Personal Allowances Worksheet. If you enter an amount on line 3 of this worksheet, enter -0- on line G of the Form W-4 Personal Allowances Worksheet. | ||||||||||||
| For lines 1 through 9, enter the projected amount for each credit you expect to take. | ||||||||||||
| 1. | Credit for child and dependent care expenses. (See Caution above) | 1 | ||||||||||
| 2. | Credit for the elderly or the disabled | 2 | ||||||||||
| 3. | Child tax credit (including additional child tax credit). (See Caution above) | 3 | ||||||||||
| 4. | Education credits | 4 | ||||||||||
| 5. | Adoption credit | 5 | ||||||||||
| 6. | Foreign tax credit | 6 | ||||||||||
| 7. | Retirement savings contributions credit | 7 | ||||||||||
| 8. | Earned income credit (unless you requested advance payment) | 8 | ||||||||||
| 9. | Other credits (such as mortgage interest credit, credit for prior year minimum tax if you paid alternative minimum tax in a prior year, residential energy efficient property credit, and general business credit) | 9 | ||||||||||
| 10. | Add lines 1 through 9. This is your total estimated tax credits | 10 | ||||||||||
| 11. | Using the table below that matches your filing status, find the line in the table that matches your combined income from all sources. Then, enter here the multiplication factor shown next to your income. | |||||||||||
| Married Filing Joint Return or Qualifying Widow(er) | Head of Household | |||||||||||
| If your combined income from all sources is: | Multiply credits by: | If your combined income from all sources is: | Multiply credits by: | |||||||||
| $0 | - | $37,000 | 10.0 | $0 | - | $26,000 | 10.0 | |||||
| 37,001 | - | 85,000 | 6.7 | 26,001 | - | 60,000 | 6.7 | |||||
| 85,001 | - | 160,000 | 4.0 | 60,001 | - | 130,000 | 4.0 | |||||
| 160,001 | - | 230,000 | 3.6 | 130,001 | - | 200,000 | 3.6 | |||||
| 230,001 | - | 390,000 | 3.0 | 200,001 | - | 390,000 | 3.0 | |||||
| 390,001 | and over — | 2.8 | 390,001 | and over— | 2.8 | |||||||
| Single | Married Filing Separately | |||||||||||
| If your combined income from all sources is: | Multiply credits by: | If your combined income from all sources is: | Multiply credits by: | |||||||||
| $0 | - | $17,000 | 10.0 | $0 | - | $18,500 | 10.0 | |||||
| 17,001 | - | 40,000 | 6.7 | 18,501 | - | 42,500 | 6.7 | |||||
| 40,001 | - | 90,000 | 4.0 | 42,501 | - | 80,000 | 4.0 | |||||
| 90,001 | - | 180,000 | 3.6 | 80,001 | - | 115,000 | 3.6 | |||||
| 180,001 | - | 390,000 | 3.0 | 115,001 | - | 195,000 | 3.0 | |||||
| 390,001 | and over — | 2.8 | 195,001 | and over— | 2.8 | 11 | ||||||
| 12. | Multiply line 10 by line 11. Enter the result here and include it in the total on line 5 of the Form W-4 Deductions and Adjustments Worksheet | 12 | ||||||||||
| Use this worksheet to figure the amount of your projected withholding for 2008, compare it to your projected tax for 2008, and, if necessary, figure an additional amount to have withheld each payday. Note. If married filing jointly, enter combined amounts. | ||||
| 1. | Enter your projected tax for 2008 from Worksheet 1, line 13 | 1 | ||
| 2. | Enter your total federal income tax withheld to date in 2008 from all sources of income. (For wages, you should be able to find the withholding-to-date on your last pay slip or statement.) | 2 | ||
| 3. | Enter the federal tax withholding you expect for the rest of 2008: | |||
| a. | For each source of wages, multiply the amount of federal income tax now being withheld each payday by the number of paydays remaining in the year and enter the combined amount for all jobs | 3a | ||
| b. | For all other sources of recurring taxable income, multiply the withholding amount by the remaining number of times the income is expected. For example, if you have federal income tax withheld from your monthly pension and you will receive nine more payments this year, multiply your monthly withholding amount by 9 | 3b | ||
| 4. | Add lines 2, 3a, and 3b. This is your projected withholding for 2008 | 4 | ||
| 5. | Compare the amounts on lines 1 and 4. | |||
| • If line 1 is more than line 4, subtract line 4 from line 1. Enter the result here and go to line 6. | ||||
| • If line 4 is more than line 1, stop here and see How Do I Decrease My Withholding? | 5 | |||
| 6. | Divide line 5 by the number of paydays (or other withholding events) remaining in 2008 and enter the result. This is the additional amount you should have withheld from each remaining payment. Enter this amount on Form W-4, line 6 | 6 | ||
| IF your filing status is... | THEN your standard deduction is... |
|---|---|
| Single or Married filing separately | $5,450 |
| Married filing jointly or Qualifying widow(er) with dependent child | 10,900 |
| Head of household | 8,000 |
| * Do not use this table if you were born before January 2, 1944, or you are blind, or if someone else can claim an exemption for you (or your spouse if married filing jointly). Use Table 2 or 3 instead. |
| Check the correct number of boxes below. Then go to the table. | ||
| You | Born before January 2, 1944 | Blind |
| Your spouse, if claiming spouse's exemption | Born before January 2, 1944 | Blind |
| Total number of boxes you checked | ||
| IF your filing status is... | AND the number in the box above is... | THEN your standard deduction is... |
| Single | 1 | $6,800 |
| 2 | 8,150 | |
| Married filing jointly or | 1 | 11,950 |
| Qualifying widow(er) | 2 | 13,000 |
| with dependent child | 3 | 14,050 |
| 4 | 15,100 | |
| Married filing | 1 | 6,500 |
| separately | 2 | 7,550 |
| 3 | 8,600 | |
| 4 | 9,650 | |
| Head of household | 1 | 9,350 |
| 2 | 10,700 | |
| * If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 3, instead. |
Use this worksheet only if someone else can claim an exemption for you (or your spouse if married filing jointly).
| If you were born before January 2, 1944, or you are blind, check the correct number of boxes below. Then go to the worksheet. | ||
| You | Born before January 2, 1944 | Blind |
| Your spouse, if claiming spouse's exemption | Born before January 2, 1944 | Blind |
| Total number of boxes you checked | ||
| 1. | Enter your earned income (defined below). If none, enter -0-. | 1. | ||
| 2. | Additional amount | 2. | $300 | |
| 3. | Add lines 1 and 2. | 3. | ||
| 4. | Minimum standard deduction. | 4. | $900 | |
| 5. | Enter the larger of line 3 or line 4. | 5. | ||
| 6. | Enter the amount shown below for your filing status. | |||
| • | Single or Married filing separately — $5,450 | 6. | ||
| • | Married filing jointly — $10,900 | |||
| • | Head of household — $8,000 | |||
| 7. | Standard deduction. | |||
| a. | Enter the smaller of line 5 or line 6. If born after January 1, 1944, and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b. | 7a. | ||
| b. | If born before January 2, 1944, or blind, multiply $1,350 ($1,050 if married or qualifying widow(er) with dependent child) by the number in the box above. | 7b. | ||
| c. | Add lines 7a and 7b. This is your standard deduction for 2008. | 7c. | ||
| Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income. | ||||
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