On the IRS Website, I found an article talking about the five important changes for the 2008 tax year. Many of these changes I was unaware of so let’s take a look and see which of these may be important to you as you complete your 2008 taxes but also plan ahead for 2009.
1.) Expiring Tax Breaks Renewed- Although these tax breaks nearly expired do to political gridlock, the deduction for state and local sales taxes was renewed as well as the educator’s expense and tuition and fees deductions. If you are a teacher, you can deduct the amount of money you spent for your classroom providing you saved the receipts. If you attend a qualifying education institution and pay tuition, that is also a deduction. All of these are renewed for 2008 and 2009. Last, the energy efficient property credit was renewed until 2016. If you are going green at home, save your receipts because green may just get you a little extra green in your tax return.
2.) Standard Deduction Increased- $10,900 for married couples, $5,450 for singles or married filed jointly and $8,000 for head of household.
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.” (source: IRS)
4.) Mileage Rates Adjusted for 2008– When gas prices spiked to more than $4 per gallon, the IRS responded by raising the mileage rate on July 1st. Prior to July 1st the rate was 50.5 cents per mile. From July 1st until now, the rate was raised to 58.5 cents per mile.
5.) Kiddie Tax- Although this may not apply to a large amount of people, the tax on a child’s investment income previously only applied to your child if they were under age 18. It now applies if the child has investment income greater than $1,800 and is under age 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. If this applies to you and your child, you may consider seeking qualified help.