2008 Tax Changes How Will You Be Affected?

Last year, Congress passed five major tax bills, which resulted in about 500 changes. Included in the changes are half a dozen new tax breaks which could help taxpayers—if you understand them. Here are a few things to keep in mind as you file your 2008 federal tax returns: Millions of taxpayers received checks last Spring as a result of Pres. Bush’s economic rebate program. But what few understand is that last year’s payment was actually an "advance" on their 2008 taxes that was calculated based on their 2007 income. Be prepared, then to receive a little less in your hand. Remember, you have already received $300 or more (depending on the amount of your rebate) as part of your 2008 refund. If you didn't get a rebate payment last year, you may still qualify if: · You were claimed as a dependent on someone else's tax return in 2007 but were on your own in 2008. · You had a significant change in 2008 income. · You had a child in 2008, which could qualify you for an additional $300 credit. · You didn't have a valid Social Security number in 2007 but got one in 2008. · You didn’t file a 2007 tax return, but earned money in 2008. If you fit into one or more of these categories, complete the worksheet on pages 62 and 63 of the instruction booklet that comes with the new Form 1040 to see how much you get. That said, here are the exceptions: If you are an individual earning $75,000 or more, or a couple earning $150,000 or more, the credit is phased out. Also, only those who receive an income through wages or Social Security benefits qualify for the benefits. Go the IRS website at www.irs.gov if you have questions. If you own a home but don't itemize deductions, you can boost your standard deduction to compensate for some of the property tax you pay. The maximum increase is the amount of tax paid, up to $500 for an individual or $1,000 for a married couple. For example, a married couple who paid $1,000 or more in property taxes could claim an $11,900 standard deduction, up from $10,900. To take advantage of the provision, check line 39C on Form 1040. New homeowners who bought a home after April 8, 2008—or who will buy one before July 1, 2009—may receive credit for up to 10% of the purchase price. The credit is capped at $7,500. To claim the credit, the property must be your personal residence, and you can't have owned another home within three years of buying this one. The good news is you can take the credit on your 2008 return even if you buy the house in 2009. But if you earn more than $75,000 and are single or $150,000 and are married, the credit is reduced until it disappears at $95,000 for an individual and $170,000 for a couple. Got that? Under current law, this credit needs to be repaid over 15 years. But that could change. Congress is considering a measure which would eliminate repayments altogether.

Rising oil prices gave you a bigger mileage allowance in 2008. If you drive for your job or business, you can deduct 50.5 cents a mile for the first half of 2008. Take off 58.5 cents for the second half of 2008. This is up from 48.5 cents for 2007. Congress has tightened requirements for charitable contributions. To receive credit 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.