7 Must Read Tax Changes of 2008

My wife sent me an email from Bank of America highlighting 7 important tax changes for the benefit of those who still haven’t filed yet.

The good thing is that most of these changes are going to help you lower your taxes so read on!

1. Adjusting for Inflation
   • For 2008, the standard deductions is up to $10,900 for married couples filing jointly and $5,450 for singles (or spouses filing separately). If you are the head of the household, it’s $8,000.
   • Dependency exemptions are now $3,500
   • The 25% tax bracket level has changed to $65,100, meaning income less than that are taxed at only 15%
   • For more, visit IRS’ website
2. Alternative Minimum Tax
   Congress likes to do patches rather than fix problems all together but no matter, they made steps to temporary help millions of filers avoid AMT. The law raises the exemptions to $69,950 for joint filers, $46,200 for single filers, and $34,975 for married people filing separately. They also extended the rule that use non-refundable personal credits to offset AMT.
   • Here’s IRS’ article for more.
3. Kiddie Tax
   In recent years, the government had made steps so parents couldn’t invest in their children’s names to avoid taxes. The new law is that any children under 19, and full time students under 24 whose earned income is less than half of the child’s support will need to pay taxes at their parents’ higher tax rate for unearned income above $1,800.
4. IRA Limits
   Finally, 2008 brings on a raised contribution limit for IRAs. $5,000 if you are under 50 and $6,000 for those 50 and up.
5. Stimulus Checks
   If you couldn’t qualify for stimulus payments last year, you may be able to this year! Examples include people who started earning more than $3,000 this year, or if you just got your social security number.
   • This article from IRS has more
6. Real Estate Property Taxes Deductions
   They now let you deduct property taxes even if you don’t itemize your deductions! The maximum is only $500 ($1,000 if you file jointly) though.
7. Energy Saving Expenses
   Green stands for money and environmental. The green energy system tax credits were going to expire in 2008 but they have extended it. You can get up to 30% of your expenses (up to a max of $2,000) for installing equipment related to solar, wind and geothermal. For fuel-cell equipment, the deduction is up to $500 per 0.5 kilowatt hour of capacity.

Not earth shattering but every little bit of tax breaks help. Here’s a bonus tax tip - Don’t rush when you file taxes. Get your documents together and don’t miss out on all tax breaks and credits.

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