2008 Federal Income Tax Changes

Posted by freetaxadvisor

January 26, 2009

There are many changes in the 2008 tax filing, here are some important one discussed. You must refer to IRS publication if you need more detail. Hopefully this will serve as a guideline for you to pick one that applies to you.

· First-time homebuyer credit. You may be eligible to claim a credit of up to $7,500 if you bought your home in 2008 and are a first-time homebuyer. However your modified adjusted gross income must be less than $95,000 ($170,000 if married filing jointly). You must understand that this credit is like a loan to you and not a free credit from government. You must recapture / repay the amount of your 2008 credit in 15 equal yearly installments beginning in 2010. For more detail you should see first time homebuyer credit guide from IRS.

· You can obtain IRS forms (Tax Forms) and IRS publications by going to this web site http://www.irs.gov/formspubs/index.html. This government web site has lot of information for you to save on federal taxes.

· Standard Mileage Rate: For 2008, cost of operating your car for business use is 50.5 cents per mile and 58.5 cents per mile after June 30^th , 2008.

· Alternate Minimum Tax: Alternate Minimum Tax, also called AMT amount has been increased to $46,200 for single and $69,950 for married filing jointly.

· IRA Deduction: Individual Retirement Account deduction amount has been raised to $5000. However for individual who’s age is 50 or older then that amount can be $6000.

· Child Investment Income: If your child’s age is under eighteen and child’s earned investment income is $1800 or more you must file Form 8615.

· Tax Relief for certain Disaster Areas: enacted as a result of the May 4, 2007, storms and tornadoes affecting the Kansas area disaster. Refer to Publication 4492-A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes, for more details.

· Tax relief for Midwestern disaster areas. Temporary tax relief was enacted as a result of the severe storms, tornadoes, and flooding affecting the Midwestern disaster areas. Refer to Publication 4492-B for more information for affected Taxpayers in the Midwestern Disaster Areas.

· Standard Deduction: Amount for a standard deduction for the people who do not itemized on Schedule A has increased and it depends on your filing status and income level, refer to IRS 1040 publication for specific application for your need.

· HOPE or lifetime learning credit: HOPE or lifetime learning credit income limit has been increased for 2008 tax filing year.

o In 2008, the amount of your Hope or lifetime learning credit is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return).

o Maximum amount of HOPE credit is increased. Beginning in 2008 the max amount of the hope credit is increased to 1,800. This is an increase from the 2007 max amount of $1,650. The amount of hope credit per eligible student is the sum of 100% of the first $1200 of the qualified education expense you paid for the eligible student and 50% of the next $1,200 of the qualified education expense you paid for that student. So if you paid $5,000 for the first student, your max credit would be $1,800. If you paid $1,400 then you can deduct $1,200+100 = $1,300

· FREE 2008 Tax Filing

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