"When we pay our income tax, particularly federal income tax, what happens ... is our taxable income -- this is after deductions and exemptions -- is actually broken down into segments, and each segment is taxed at a different tax rate. And the rates range from 10 percent right now up to 35 percent," explains Dr. Walden, a professor of agricultural and resource economics.

"Now each year also the ranges of those segments are going to change, and they are adjusted for inflation. And this is actually a good thing because it means a wider range of income, for example, will apply to the lower and smaller tax brackets," he adds. "So let me give you an example: For 2008 for a married couple, the 10 percent rate is going to apply to taxable income up through $16,050. Actually in 2007 it applied only to income up to $15,650.

"The highest 35 percent rate for 2008 is going to apply to taxable income over 357,700. In 2007 it was $349,700.

"So this may sound confusing, but it's incredibly important because the changes in these brackets -- the changes in the income ranges that each rate applies (to) -- really determines how much income tax you will pay."