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2008 Tax Law Changes
February 12, 2009 - Howard Nemenoff
This week's blog is going to cover some of the changes to the tax law for 2008 taxes. Congress made many many changes, as in previous years, but I am only going to cover the changes that should affect the majority of your personal income taxes.
Personal Exemption and Standard Deductions
Of course, personal exemptions and the standard deductions have risen this year. The exemption amount has increased to $3500 per exemption. The standard deduction has risen as follows:
Single $5,450 Married Filing Seperately $5,450 Head of Household $8,000 Married Filing Jointly $10,900 Qualified Widow(er) $10,900
If you were born before January 2, 1944 and are married filing jointly you can add $1,050 to the standard deduction, for each person who meets the qualification. If you are Single or Head of Household add $1350.
If you are blind and are married filing jointly you can add $1,050 to the standard deduction, for each person who meets the qualification. If you are Single or Head of Household add $1350.
For those taxpayers who own a home but don't have enough deductions to itemize, you can add some of the property taxes you paid to increase your standard deduction. The maximum increase is the amount of tax paid, up to $500 for an individual or $1,000 for a married couple.
Retirement Savings Plans
You and your spouse, if filing jointly, each may be able to deduct an IRA contribution of up to $5,000 ($6,000 if age 50 or older at the end of 2008). You may be able to take an IRA deduction if you were covered by a retirement plan and your modified adjusted gross income is less than $63,000 ($105,000, if you are married filing jointly or a qualified widow(er)).
You may be able to make a Roth IRA contribution if your modified adjusted gross income is less than $116,000 ($169,000, if you are married filing jointly or a qualifying widow(er)).
The adjusted gross income limit for claiming the Retirement Savings Credit is increased to $26,500 ($39,750 if head of household: $53,000 if married filing jointly).
First Time Home Buyers Credit
If you are a "First Time Home Buyer" and purchase a home, as your principle residence, after April 8, 2008 -- or if you buy one before July 1, 2009 -- you may be able to claim a credit for up to 10% of the purchase price. According to the IRS, a "First Time Home Buyer" is one who has not owned a home in the previous 3 years. The credit is a maximum of $7,500. This credit is actually an interest free loan repayable evenly over 15 years. The loan may be payable immediately if the house is sold. The payments are paid with your tax return beginning in 2010. The credit is phased out for higher earners (over $75,000 single or $150,000 married filing jointly). Even if you have purchased the home in 2009, you can still take the credit on your 2008 taxes.
There is currently a measure being considered by Congress whereby those who take advantage of the credit will not have to pay it back.
If you drive for business purposes, the amount you can deduct has increased due to last year's gasoline prices. For driving on the job in the first half of 2008, you can deduct 50.5 cents a mile and 58.5 cents a mile in the 2nd half. For medical miles, the rate is 19 cents a mile for the first half of 2008 and 27 cents a mile for the second half. For volunteer work, the rate is 14 cents per mile. If your volunteer work was directly associated with the Midwestern Disaster Relief, the rate is 36 cents per mile in the first half of the year and 41 cents per mile in the 2nd half.
Congress further tightened requirements on substantiating deductions for charitable contributions. For a donation in 2007 of clothing or cars, you had to have in your possession a receipt or canceled check verifying the contribution. For 2008, that requirement was expanded to include all charitable donations. There's no need to send the receipts with your return. You just have to keep them in your files in case you're audited. Extension of Tax Provisions
Several Tax Provisions that were scheduled to expire at the end of 2007 were extended. These include:
The deduction of educator expenses, up to $250, as an adjustment to income.
The deduction of qualified tuition and fees, as an adjustment to income
The itemized dedution of state and local general sales taxes. Don't forget that if you make a large purchase, such as a car, boat, RV, truck, airplane, etc, you can add the sales tax you paid on those purchases to the general sales taxes.
I hope you are enjoying the blog, maybe finding it educational, and possibly saving you some money. I would love to hear from you. Once again, if you leave comments and/or questions, I will do my best to answer in a very timely fashion. If there are specific topics that you would like to hear about, please feel free to email me or leave suggestions in your comments. If you would like to contact me directly, my contact information is located in my bio.
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