To taxpayers who have faithfully filed tax returns for years, it may be surprising to find that they may not have to file. Generally, you do not need to file a tax return if your income is under these amounts:
| Filing Status | Federal | Arizona resident | ||
| Under age 65 | 65 or older | Under 65 | No tax* | |
| Single | $8,750 | $10,050 | $5,500 | $6,347 |
| Head of Household | $11,250 | $12,550 | $5,500 | $12,894 |
| Married filing jointly | $17,500 | $20,100 | $11,000 | $12,694 |
| Married filing separately | $0 | $0 | $5,500 | $6,347 |
| Widow(er) with qualifying dependent | $17,500 | $18,800 | -- | -- |
However... you must file a return if you had self-employment income of $400 or more.
Or, you should file if someone else (like your parents) could claim you as a dependent and you earned over $800 or had investment income (interest on savings, stock dividends, etc.) of more than $250.
Also, you should file a return even if your income is under these limits if you:
You may be required to file a state return even if you don't have to file a federal one. There are other circumstances where you might be required to file, or it might be beneficial to file, so check with an Enrolled Agent to be sure.
*These figures include the "family tax credit." Even though there is generally no tax up to this amount, taxpayers must still file a return if their Arizona incomes are above the "no filing" amount.[ Top of page ]
Personal exemptions for 2007 are $3,400 per person ($3,500 in 2008). You are entitled to claim one exemption apiece for yourself, your spouse if married, and each dependent you can claim. If someone else (such as your parent) claims you as a dependent, you cannot take an exemption for yourself.
In Arizona, personal exemptions are figured differently. A single person or a married person filing separately gets a personal exemption of $2,100. A married couple filing jointly or a single head of household has a personal exemption of $4,200. Dependent exemptions are $2,300 per person.
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The IRS excludes from your taxable income a specified amount of expenses, called a "standard deduction." If your actual expenses in the allowed categories total more than the standard deduction amount, you may deduct those actual expenses, which is called "itemizing." If your itemized deductions are less than the standard amount, you are better off to use the standard deduction.
| 2007 Filing Status | Federal | Over 65 | Arizona |
| Single | $5,350 | $6,650 | $4,373 |
| Head of Household | $7,850 | $9,150 | $8,745 |
| Married filing jointly | $10,700 | $13,300 | $8,745 |
| Married filing separately | $5,350* | $6,650* | $4,373 |
| Widow(er) with qualifying dependent | $10,700 | $12,000 | -- |
* Only if spouse does not itemize; otherwise $0
| 2008 Filing Status | Federal | Over 65 | Arizona # |
| Single | $5,450 | $6,750 | $TBA |
| Head of Household | $8,000 | $9,300 | $TBA |
| Married filing jointly | $10,900 | $13,500 | $TBA |
| Married filing separately | $5,450* | $6,750* | $TBA |
| Widow(er) with qualifying dependent | $10,700 | $12,000 | -- |
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Tax brackets
Income tax is based on your income after personal exemptions, standard or itemized deductions, and other adjustments are subtracted. A tax bracket is the rate at which the top of your income is taxed, but not all of it. Someone in a 28 percent tax bracket has part of their income taxed at 10 percent and part at 25 percent, with only the highest portion at 28 percent. The tax bracket tells you how much you will have to pay in federal income tax on each additional dollar you make.
| Federal Tax bracket |
Single | HOH | MFJ or QW | MFS |
| For income over... | ||||
| 10% | $0 | $0 | $0 | $0 |
| 15% | $7,825 | $11,200 | $15,650 | $7,825 |
| 25% | $31,850 | $42,650 | $63,700 | $31,850 |
| 28% | $77,100 | $110,100 | $128,500 | $64,250 |
| 33% | $160,850 | $178,350 | $195,850 | $97,925 |
| 35% | $349,700 | $349,700 | $349,700 | $174,850 |
The federal Form 1040 actually collects several other taxes including:
|
2008 Federal Tax bracket |
Single | HOH | MFJ or QW | MFS |
| For income over... | ||||
| 10% | $0 | $0 | $0 | $0 |
| 15% | $8,025 | $11,450 | $16,050 | $8,025 |
| 25% | $32,550 | $43,650 | $65,100 | $32,550 |
| 28% | $78,850 | $112,650 | $131,450 | $65,725 |
| 33% | $164,550 | $182,400 | $200,300 | $100,150 |
| 35% | $357,700 | $357,700 | $357,700 | $178,850 |
| Arizona | Tax bracket | |||
| Status | Income over | 2006 | 2007 | 2008 |
| Single or MFS | $0 | 2.73% | 2.59% | 2.87% |
| $10,000 | 3.04% | 2.88% | 3.20% | |
| $25,000 | 3.55% | 3.36% | 3.74% | |
| $50,000 | 4.48% | 4.25% | 4.72% | |
| $150,000 | 4.79% | 4.54% | 5.04% | |
| MFJ or HOH | $0 | 2.73% | 2.59% | 2.87% |
| $20,000 | 3.04% | 2.88% | 3.2% | |
| $50,000 | 3.55% | 3.36% | 3.74% | |
| $100,000 | 4.48% | 4.25% | 4.72% | |
| $300,000 | 4.79% | 4.54% | 5.04% | |
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Standard mileage rates may be used as an alternative to deducting actual expenses. The standard mileage rate must be claimed the first year a vehicle is used for deductible purposes; you cannot change to it once you have started claiming actual expenses. To deduct either mileage or actual expenses, you must have a written record for each trip showing:
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Taxpayers age 50 and older may contribute a higher amount to retirement plans to "catch up," regardless of whether or they had contributed the maximum amounts earlier in life.
| Year | IRA & Roth | 401(k) & 403(b) | SIMPLE |
SEP 25% of compensation | |||
| Under age 50 | Catchup | Under age 50 | Catchup | Under age 50 | Catchup | ||
| 2004 | $3,000 | $3,500 | $13,000 | $16,000 | $9,000 | $10,500 | $41,000 |
| 2005 | 4,000 | 4,500 | 14,000 | 18,000 | 10,000 | 12,000 | $42,000 |
| 2006 | 4,000 | 5,000 | 15,000 | 20,000 | 10,000 | 12,500 | $44,000 |
| 2007 | 4,000 | 5,000 | 15,500 | 20,500 | 10,000 | 13,000 | $45,000 |
| 2008 | 4,000 | 5,000 | 15,500 | 20,500 | 10,000 | 13,000 | $45,000 |
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Your estate will have to pay taxes if its net value when you die is more than the "exempt" amount set by Congress. The exemption amount is reduced by any gifts throughout the lifetime of more than the annual gift tax exclusion limit. The gift exclusion is per donor and per recipient, so a married couple can exlcude gifts up to double the amount shown in the chart to a child, for instance. Making a gift of more than the annual exclusion does not trigger immediate taxes, only the need to file a gift tax Form 709.
| Year of death | Federal estate tax exemption | Highest rate on "excess" property | Annual gift tax exclusion |
| 2002 | $1 million | 50% | $11,000 |
| 2003 | $1 million | 49% | $11,000 |
| 2004 | $1.5 million | 48% | $11,000 |
| 2005 | $1.5 million | 47% | $11,000 |
| 2006 | $2 million | 46% | $12,000 |
| 2007 | $2 million | 45% | $12,000 |
| 2008 | $2 million | 45% | TBA |
| 2009 | $3.5 million | 45% | TBA* |
| 2010 | Tax Repealed | Tax Repealed | Tax Repealed |
| 2011 | $1 million | 55% | TBA* |
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