Here are a few tax law changes that taxpayers may want to note before filing their 2008 federal tax returns, according to the IRS:
1. Expiring Tax Breaks Renewed
The following popular tax breaks were renewed for tax-years 2008 and 2009:
· Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5
· Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
· Tuition and fees deduction on Form 8917
In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.
2. Standard Deduction Increased for Most Taxpayers
The 2008 basic standard deductions all increased. They are:
· $10,900 for married couples filing a joint return and qualifying widows and widowers
· $5,450 for singles and married individuals filing separate returns
· $8,000 for heads of household
Beginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.
3. Contribution Limits Rise for IRAs and Other Retirement Plans
This filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $53,000 and $63,000. For married couples filing jointly, the income phase-out range is $85,000 to $105,000.
4. Standard Mileage Rates Adjusted for 2008
The standard mileage rates for business use of a vehicle:
· 50.5 cents per mile from Jan. 1 to June 30, 2008
· 58.5 cents per mile driven during the rest of 2008
The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move: · 19 cents per mile Jan. 1 to June 30, 2008
· 27 cents from July 1 to Dec. 31, 2008
The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.
5. Kiddie Tax Revised
The tax on a child's investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,800 and is:
· Younger than 18
· 18 years of age and had earned income that was equal to or less than half of his or her total support in 2008
· Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.
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