Some changes have been incorporated in the tax-law again this year, so it would be better to go through the list of tax deductions a few times so that you include all these changes which may affect your return. One of the major changes is the increase in the exemption for the Alternative Minimum Tax. A couple of other tax credits and deductions which were to expire have been extended. Other changes include a new standard personal property tax deduction and special credit by way of additional tax deduction to first time homeowners.
Also for Retirement Savings credits will be made available. The payments got from the economic stimulus package would not be taxable and need not be reported on your 2008 tax return. You can also qualify for the Recovery Rebate Credit if you did not get a stimulus payment if you happen to be tax payer. Instructions on whether you would qualify will be listed on form 1040, 1040 A and 1040 EZ.
The list of tax deductions still includes the deduction for state and local taxes on form 1040 Schedule A, Line 5. Tuitions and fees on form 8917 and the District of Columbia first-time homebuyer credit on Form 8859 are the same as 2007.The educator expense deduction on Line 23 or Form 1040A line 16.
The non-business energy property credit for energy efficient insulation, furnaces, windows, and water heaters in the main residence will not be available in 2008, but what is available is the residential energy-efficient property credit which will continue through 2016. The other things that would be included in 2008 itemized deduction are wind energy and geothermal heat pumps credits. You can also claim an additional standard deduction as the standard deduction changes a little this year and this would be based on state or local real estate taxes you paid or even in case you had a disaster loss from a centrally declared disaster.
Business expenses have changed. The standard mileage rate has increased to 50.5 cents per mile for the first six months of 2008 which is 2 cents higher than 2007 and 58.5 cents for the rest of 2008. If you keep a 12 month expense worksheet remember to increase the mileage rate for the last six months of 2008.
For each personal and dependent, the exemption value has risen to $3500, which is up $100 from 2007.These are done to keep up with inflation. For yours and your employer’s convenience a list of all the changes can be found in the publication: 2008 Inflation Adjustments Widen Tax Brackets, Change Tax Benefits.
Child care tax credit is the same as what existed in 2007, but the tax on a child’s investment income applies if the income is over $1800. It is also applicable if the child is or below 18 years old having an income that is equal to or less than half of his or her total support. This is also applicable if the student is over 18 and under 24 and was a student during 2008 and had earned income equal or less than half of his or her support.
Self-employment tax change is another one that is added to the list of tax deductions. Anyone who gets disability benefits or Social Security Retirement or any Conservation Reserve Program payments can be exempt from the 15.3-percent social security self-employment tax. The instructions regarding this are given in Publication 225, Farmer’s Tax Guide.
