Highlights of 2008 tax law changes

Thursday, January 22, 2009, AM | Leave Comment

These are among the changes taxpayers will find when they fill out their 2008 tax returns.

AMT exemptions rise; several expiring deductions and credits get a new lease on life; a new standard property tax deduction and a special first-time home-buyer credit are available to some homeowners; and retirement savings incentives expand.

Economic Stimulus Payments Tax Free
Economic stimulus payments are not taxable, and they are not reported on 2008 tax returns.

AMT Exemption Increased for One Year
For tax-year 2008, Congress raised the alternative minimum tax exemption.

Expiring Tax Breaks Renewed
Several popular tax breaks that expired at the end of 2007 were renewed for tax-years 2008 and 2009.

Standard Deduction Increased for Most Taxpayers
Nearly two out of three taxpayers choose to take the standard deduction rather than itemizing deductions such as mortgage interest and charitable contributions.

First-Time Home-buyer Credit
Those who bought a main home recently or are considering buying one may qualify for the first-time home-buyer credit. Normally, a taxpayer qualifies if she didn’t own a main home during the prior three years.

Tax Relief for Midwest Disaster Areas
Special tax relief related to severe storms, tornadoes or flooding, occurring after May 19, 2008, and before Aug. 1, 2008, is available to individuals in portions of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin that were affected by these disasters.

Contribution Limits Rise for IRAs and Other Retirement Plans
This filing season, more people can make tax-deductible contributions to a traditional IRA.

Standard Mileage Rates Adjusted for 2008
The standard mileage rate for business use of a car, van, pick-up or panel truck is 50.5 cents per mile from Jan. 1, 2008, to June 30, 2008, up 2 cents from 2007. The rate is 58.5 cents for each mile driven during the rest of 2008.

Exemptions Rise
The value of each personal and dependency exemption is $3,500, up $100 from 2007.

Earned Income Tax Credit Rises (EITC)
Available to low and moderate income workers and working families, the EITC helps taxpayers whose incomes are below certain income thresholds.

Taxes Lowered for Many Investors
The five-percent tax rate on qualified dividends and net capital gains is reduced to zero.

Kiddie Tax Revised
The tax on a child’s investment income applies under certain conditions.

Self-Employment Tax Changes
For those who receive Social Security Retirement or disability benefits, any Conservation Reserve Program (CRP) payments are now exempt from the 15.3-percent social security self-employment tax.

Visit IRS Website
For complete details of the 2008 tax law changes, visit the IRS website.

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