Taxable Income is determined by reducing your Adjusted Gross Income (AGI) by either the Itemized Deductions or Standard Deductions AND the number of Exemptions on your return.

The amount you can deduct for each exemption you can claim on your federal income taxes has increased again in 2008. 

The 2007 value of $3,400 has increased to $3,500 in 2008.  That's an increase of $100 in each of the last two years.