As a new year begins, it is once again time to
file your taxes. With the passing of the Emergency Economic Stabilization
Act of 2008 and the Housing Rescue and Foreclosure Prevention Act
of 2008, tax laws continue to change and get more complex. Many
of the new provisions may affect your 2008 tax return, and we at
Above-N-Beyond are prepared to provide the services required to
ensure that you benefit from these tax law changes.
Described below are tax laws that may affect your
2008 tax return:
- Recovery Rebate Credit
- If you didn’t receive your economic stimulus payment in
2008, you can still receive a payment by taking the Recovery Rebate
Credit in 2009. If circumstances occurred in 2008 that would increase
your payment (such as the birth of a child), you can receive the
credit less the amount of the economic stimulus payment received
- First-time Homebuyer Credit
- The First-time Homebuyer Credit effectively provides a long-term,
interest free loan from the government. If you qualify as a “first-time
homebuyer,” you can claim a refundable tax credit for a
qualifying home purchased in the U.S. after April 8, 2008, and
before July 1, 2009, equal to the lesser of 10% of the purchase
price of the home, or $7,500 ($3,750 if married filing separately).
- Child Tax Credit
- There are new tax laws that enhance the Child Tax Credit. The
refundable amount is now calculated on the amount of earned income
that exceeds $8,500 (previously $12,050), and new laws change
the definition of a “qualifying child”.
- Personal Exemptions and Standard Deductions
- For 2008, each personal exemption you can claim is worth $3,500
(up by $100 from 2007). Also, the standard deduction rises to
$10,900 for joint filers, to $5,450 for single filers, and to
$8,000 for head-of-household filers.
- Additional Standard Deduction for Real Property
- If you take the standard deduction, you may be eligible for
an increase. The Housing Assistance Tax Act of 2008 allows an
additional standard deduction for real property taxes for non-itemizers
through 2009 to a maximum of a $500 additional standard deduction
($1,000 for joint filers). For 2008, the $10,900 standard deduction
for joint filers will increase to a maximum of $11,900 with the
additional standard deduction for nonitemizers. The $5,450 standard
deduction for single filers will increase to a maximum of $5,950,
and the standard deduction for head-of-household filers will increase
from $8,000 to $8,500.
- General Sales and Use Tax Deductions
- Taxpayers can still elect to take state and local general sales
and use taxes as an itemized deduction instead of deducting state
and/or local income taxes.
- Higher Education Expense Deductions
- You may be eligible to take up to a $4,000 higher education
expense deduction for qualified tuition and related expenses paid
during the tax year for you, your spouse, or your dependent.
- Educator Expense Deductions
- Teachers and other education professionals can deduct up to
$250 of outof-pocket expenses, including the cost of books, supplies,
equipment, and software used in the classroom, regardless of whether
or not they itemize.
- Deduction for Medical Expenses of Dependent Parent
- If you furnished more than half of the support for your parent,
you can deduct the medical expenses paid for the parent.
- Tax Credits for Alternative Motor Vehicles
- You may be eligible for a tax credit if you purchased a hybrid
passenger car or light truck in 2008.
- Tax Credits for Energy-Saving Home Improvements
- Various credits are available if you implemented energy-efficient
improvements to your existing home, or if you purchased a residential
- AMT Patch
- Congress included an Alternative Minimum Tax (AMT) patch in
the new law. Under the new law’s patch for the 2008 tax
year, the AMT exemption amounts are $69,950 for joint filers and
surviving spouses, $46,200 for single and head-of-household filers,
and $34,975 for married couples filing separately.
- IRA Contributions, Deductions, and Tax-Free Distributions
- The maximum IRA (traditional or Roth) contribution increases
from $4,000 to $5,000. Filers who reach age 50 before the end
of 2008 can contribute another $1,000. You can take a full IRA
deduction if your modified adjusted gross income is less than
$85,000 (married filing jointly) or $53,000 (single or head of
household). A partial deduction is allowed until your adjusted
gross income reaches $105,000 (married filing jointly) or $63,000
(single or head of household). You can also take a tax-free distribution
from your IRA if it is for charitable purposes.
- Debt Forgiveness
- Due to the housing crisis and the rise in foreclosures, the
rescue plan extended the Mortgage Forgiveness Debt Relief Act
of 2007. Normally, debt forgiveness results in taxable income,
but under the Mortgage Forgiveness Debt Relief Act, taxpayers
can exclude debt forgiven on their principal residence if the
balance of their loan was less than $2 million.
Please contact us if you want more details on the
new changes or if you would like to discuss how the new changes
could affect your 2008 tax return.