Eight New Items on
Your 2008 Return
Key Changes in Store for Tax Filers
It has been a tumultuous year on the tax front. Several significant new laws and a flood of new regulations and rulings in 2008 have contributed to more than 500 revisions in the federal tax code. Keeping that in mind, here is a roundup of eight key changes on 2008 returns.
-
Homebuyer’s tax credit: For the first time ever, a homebuyer may claim a credit equal to the lesser of $7,500 or 10 percent of the home’s purchase price. The credit is available for a principal residence purchased after April 8, 2008, and before July 1, 2009. Note: If a home purchased in 2009 qualifies, you can claim the credit on your 2008 return.
-
Zero-percent capital gains rate: Previously, the maximum 15 percent capital gains tax rate for net long-term capital gain and qualified dividends was reduced to only 5 percent for taxpayers in the regular 10 percent and 15 percent tax brackets. But this 5 percent rate drops to zero percent for 2008. Currently, the zero percent rate is scheduled to remain in effect through 2010.
-
Kiddie tax: Beginning in 2008, the kiddie tax generally applies to unearned income above a specified annual threshold received by a child who is younger than 19 years of age (up from age 18 years for 2007) or a full-time student younger than age 24 years. For 2008 returns, unearned income above $1,800 is taxed at the top tax rate of a child’s parents.
-
Small business deductions: If you own a small business, you can take advantage of an enhanced Section 179 deduction and 50 percent “bonus depreciation” for qualified assets placed in service last year. The maximum Section 179 allowance—the amount you can currently deduct—is increased to $250,000 for 2008 (up from $125,000 for 2007).
-
Property-tax deduction: Prior to 2008, state and local taxes could be deducted only by filers who itemized their tax deductions. But a law change enables nonitemizers to deduct the lesser of $1,000 ($500 for single filers) or property taxes actually paid on a 2008 return. Note: This special deduction was recently extended for the 2009 tax year.
-
Standard mileage rates: In an unusual move, the IRS adjusted the standard mileage rate for business driving midway through the year. The initial rate of 50.5 cents per business mile plus related tolls and parking fees (up from 48.5 cents per mile for 2007) was increased to 58.5 cents per business mile for the last six months of 2008. Note: The rate drops down to 55 cents per mile for 2009.
-
Itemized deductions: Itemized deductions are reduced for high-income taxpayers with an adjusted gross income (AGI) above a specified level. The reduction for 2008 begins if AGI exceeds $159,950 for joint filers (up from $156,400 for 2007). For 2008, you forfeit only one third of the amount that would otherwise be lost, as opposed to two thirds in 2007.
-
Casualty losses: Generally, personal casualty losses are deducted only to the extent they exceed 10 percent of your AGI. However, beginning in 2008, this 10 percent-of-AGI limit is eliminated for federal disaster-area losses (see Tax Outlook Under New Casualty Loss Rules).
Of course, this is only
an overview of several key changes for 2008 returns. Please
contact us for
assistance with for your personal situation.
Wherewithal
is provided by Somerset for our clients and other interested persons
upon request. Since technical information is presented in generalized
fashion, no final conclusion on these topics should be made without
further review. For additional information on the issues, please
contact
a member of the firm. Somerset provides total financial solutions,
including accounting, assurance, information solutions, litigation &
valuation, tax, wealth management and management consulting services to
entrepreneurs and their businesses. This document is not intended or
written to be used, and cannot be used, for the purpose of avoiding tax
penalties that may be imposed on the taxpayer.
Somerset CPAs,
P.C.
3925 River Crossing Parkway, Third Floor
Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com
.jpg)