Some changes in tax law that may affect you as you file your 2008 return:
Personal exemption
– Each personal or dependent exemption is now worth $3,500, up $100 from 2007.
Standard deduction
For people who don’t itemize, the standard deduction for 2008 has increased to:
– $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.
On state or local real estate taxes, the maximum deduction is $500, or $1,000 for joint filers.
Net disaster losses from a federally declared disaster can increase the standard deduction.
Alternative minimum tax exemption rises to:
– $69,950 for a married couple filing a joint return and qualifying widows and widowers.
– $34,975 for a married person filing separately, up from $33,125.
– $46,200 for singles and heads of household, up from $44,350.
Under current law, these exemption amounts will drop to $45,000, $22,500 and $33,750, respectively, in 2009. Form 6251 and the AMT Calculator provide more information.
First-time homebuyer credit
– Up to $7,500 for purchase of a principal residence between April 9, 2008, and June 30, 2009.
– To qualify, you must be a first-time home buyer or have not owned a home during the previous three years.
– The credit is actually an interest-free loan and must be paid back over 15 years.
Earned Income Tax Credit
The maximum earned income tax credit was raised to:
– $4,824 for people with two or more qualifying children.
– $2,917 for those with one child.
– $438 for people with no children.
Maximum income levels also are up:
– $41,646 for those with two or more children.
– $36,995 for people with one child.
– $15,880 for those with no children.
Capital Gains Tax
The 5 percent capital gains tax is reduced to zero for people with taxable income below:
– $65,100, if married filing jointly or qualifying widow or widower.
– $32,550, if single or married filing separately.- $43,650, if head of household.
Retirement- If you’re covered by a retirement plan at work, the maximum modified adjusted gross income you can have and still take a deduction for IRA contributions rose to $63,000 ó $105,000 if married filing jointly. The maximum deduction is $5,000, $6,000 if you were 50 or older by the end of 2008.
– In 2009, the income limits increase again, to $65,000 or $109,000 on a joint return.
– The limit on elective deferrals to a traditional or safe harbor 401(k) plan is $15,500 for 2008 and $16,500 for 2009.