Tax Update

Provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).

Increased Contribution Limits

Traditional and Roth IRAs

YEAR	LIMIT	Catch-Up*
2008	$5,000	$1000
Beginning in 2009, the limit will be indexed for inflation annually in $500 increments

Simple IRAs

YEAR	LIMIT	Catch-Up*
2008	$10,500	$2,500
*Beginning in 2007, Simple IRA contributions will be indexed to inflation.

401K Plans

YEAR	LIMIT	Catch-Up*
2008	$15,500	$5,000
*Beginning in 2007, 401K contributions will be indexed to inflation.

403 B Plans

YEAR	LIMIT	Catch-Up*
2008	$15,500	$5,000
*Beginning in 2007, 403B contributions will be indexed to inflation.

Section 457 Plans

YEAR	LIMIT	Catch-Up*
2008	$15,500	$5,000
*Beginning in 2007, 457 contributions will be indexed to inflation.

Simplified Employee Pension SEP Plans

Year Compensation	LIMIT	Maximum Considered
2008	$46,000	$230,000

*Catch-up contributions limited to persons over age 50.

Coverdell Education Savings Accounts - ESA
1. Maximum annual contribution increases to $2,000
2. Special needs beneficiaries are exempted from the prohibition against contributions being made after the beneficiary turns 18
3. Corporations, tax-exempt organizations and other entities may contribute to an Education Savings Account
4. Contributions counted toward any tax year are permissible until April 15 of the following year, rather than being cut off on December 31
5. Excess contributions must be recovered by May 31 (vs. April 15) following the year for which the excess contribution was made.
529 College Savings Plans
1. Qualified distributions are now free of federal income tax, giving these plans even greater appeal
2. Non-qualified withdrawals are subject to a 10% federal tax penalty on earnings (vs. a 10% state penalty)
3. $60,000 for an individual and $120,000 for a married couple can be contributed and treated as a 5 year contribution (consult your CPA for details)
Reduced Estate Taxes

Tax Year	Top estate tax rate	Exemption amount
2008	45%	$2 million
2009	45%	$3.5 million
2010	0%	N/A

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