The Internal Revenue Service has come out with new tax laws that will help families receive more of their tax withholdings when they file their federal income tax return for 2008. These new tax laws, passed by congress, were put into place to help taxpayers overcome the economic slump.
Recovery Rebate Credit: The Recovery Rebate Credit is a one-time benefit for taxpayers who were not eligible for the first economic stimulus check distributed in 2008. Since the stimulus check was based on your 2007 tax return, any changes in 2008 may get you more money.
If you did not receive a stimulus check or if your check was less than the maximum $600 then you may qualify for a rebate up to the initial $600. Also, if you had a child in 2008 that was not a dependent in 2007, then you are eligible for the $300 child credit. You can use the Recovery Rebate Calculator to see if you are eligible.
Alternative Minimum Tax: The Alternative Minimum Tax has been a thorn in the side of the American middle class for years. This tax came about with The Tax Reform Act of 1969. This tax was initially set up to ensure that some wealthier tax payers did not use every possible deduction in order to get out of paying taxes. The problem is that it was set to 1969 wages so every year congress has to increase the exemption amount in order for the tax not to affect the middle class.
The Alternative Minimum Tax kicks in at a calculated wage and completely eliminates deductions and tax credits causing the taxpayer to pay more taxes to the government. Luckily, congress has increased the allowable income amount again this year so fewer Americans will be affected by this tax.
First Time Homebuyer Credit: Anyone who bought a house between April 9, 2008 and June 30, 2009 may be eligible for up to $7,500. This is an interest free loan from the government. Homebuyers have to pay back the money within fifteen years but it will only cost them $500 per year.
First time homebuyers may borrow up to ten percent of the purchase price of the home up to $7,500. If you sell the house, then the remainder of the loan is due that year. You can claim this credit with your 2008 federal tax return.
Midwestern Disaster Tax Relief: More relief is pouring into the states of Arkansas, Illinois, Indiana, Iowa, Missouri, Nebraska, and Wisconsin. If you live in one of the counties that was declared a disaster area due to severe storms, tornadoes, or flooding you may be eligible for an increase in the housing credit. People in these areas can also expect a decrease in restrictions on deductions.
The Midwestern Disaster Tax Relief also provides an additional exemption for someone who provides housing for a person displaced by these natural disasters.
The tax laws change every year. This year there a few positive changes that will help Americans keep more of their tax money. For a complete list of the 2008 tax law changes you can visit www.irs.gov. You can also view the highlights here.