What's New for 2008 Tax Year
Extended tax
provisions:
Several popular tax breaks that expired at the end
of 2007 were renewed for tax-years 2008 and 2009
including:
· Educator
Expense Deduction
· Tuition
and fees Deduction
· Sales
Tax Deduction
· Residential
Energy Efficient Property Credit
The
non-business energy property credit for insulation, exterior windows, exterior
doors, furnaces, water heaters and other energy-saving improvements to main home
is not available in 2008, but will
return in 2009.
THREE-YEAR EXTENSION OF DISCHARGED MORTGAGE DEBT INCOME EXCLUSION
The act extends (for three
years through 2012) the temporary exclusion from gross income of discharges of
qualified principal residence indebtedness
Alternative
Minimum Tax:
For tax-year
2008, Congress raised the alternative minimum tax exemption to the following
levels:
· $69,950
for a married couple filing a joint return and qualifying widows and widowers,
up from $66,250 in 2007
· $34,975
for a married person filing separately, up from $33,125 and
· $46,200
for singles and heads of household, up from 44,350
Under current law, these exemption amount will drop to $45,000, $22,500 and
$33,750, respectively, in 2009.
Economic Stimulus
Payments Tax Free
Economic stimulus payments are not taxable, and they are not reported on 2008
tax returns. However, the stimulus payment does affect whether a taxpayer can
claim the Recovery Rebate Credit and how much credit he or she can get. The
credit is figured like last year's economic stimulus payment except that the
amounts are based on tax year 2008 instead of 2007. A taxpayer may qualify for
the
Recovery Rebate Credit
Additional
Standard Deduction
New
this year, taxpayers can claim an additional standard deduction, based on the
state or local real estate
taxes paid in 2008. Taxes paid on foreign or
business property do not count. The maximum deduction is $500, or $1,000 for
joint filers.
First-Time Homebuyer Credit
Those who bought a
main home recently or are considering buying one may qualify for the
first-time homebuyer credit. Normally, a taxpayer qualifies if she didn’t
own a main home during the prior three years. This unique credit of up to $7,500
works much like a 15-year interest-free loan. It is available for a limited time
only –– on homes bought from April 9, 2008, to June 30, 2009. It can be claimed
on new Form 5405 and is repaid each year as an additional tax. Income limits and
other special rules apply.
Taxes Lowered for Many Investors
The five-percent
tax rate on qualified dividends and net capital gains is reduced to zero. In
general, this reduction applies to investors whose
TAXABLE INCOME
is below:
·$65,100,
if married filing jointly or qualifying widow or widower
·$32,550,
if single or married filing separately or
·$43,650,
if head of household.
Note that taxable
income is normally less than total income.
Kiddie Tax Revised
The tax on a child's investment income applies if
the child has investment income greater than $1,800 and is:
· Under 18
old.
·18 years of
age and had earned income that was equal to or less than half of his or her
total support in 2008 or.
· Over 18 and
under 24, a student and during 2008 had earned income that was equal to or less
than half of his or her total support.
Previously, the tax only applied to children under age 18.
Form 8615 is used to figure this tax. |
