While the Emergency Economic Stabilization Act was one top financial hot topics in 2008, several tax law changes were implemented last year that will affect your 2008 tax return. If you received an economic stimulus payment in 2008, you don’t have to pay any tax on the payment. Were you a first-time homebuyer after April 9? You’ve earned up to $7,500 in tax-free credits when you file your 2008 tax return.
Here are some other important tax changes to make note of when filing your 2008 tax return:
Standard Deduction Increased for 2008 Tax Return Filing
The standard deduction for singles and married individuals filing separately is now $5,450 (an increase of $100 from 2007) and $8,000 for heads of households (an increase of $150). Married couples filing jointly and qualifying widows and widowers can now take a standard deduction of $10,900 (an increase of $200).
Economic Stimulus Payments Credit
If you received an economic stimulus payment in 2008, you can claim a Recovery Rebate Credit where you do not pay a single penny on the income. If you received an economic stimulus check, the IRS would have sent you Notice 1378, the Economic Stimulus Payment Notice as formal receipt.
First Time Homebuyer Credit for 2008 Tax Return Filing
You can take a credit of up to $7,500 if you made a new home purchase between April 9, 2008 and June 30, 2009. This credit is 10 percent of the purchase price of the home, and is available to first-time homebuyers who have not owned a home in the last three years.
Tax Benefits for Midwest Disaster Areas
If you live in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska or Wisconsin and were impacted by severe weather between May 19, 2008 and August 1, 2008, you may qualify for several tax relief benefits. Check Publication 4492-B to find out exactly how much you can claim on your 2008 tax return.
Real Estate Tax Deductions for 2009 Tax Return Filing
The IRS is allowing those who don’t itemize their deductions to take an additional standard deduction if they pay real estate taxes. The deduction is now available for the 2008 and 2009 tax filing years.
Renewal of Expiring Tax Breaks
Several tax breaks that expired at the end of 2007 have been implemented for 2008. You can now take a deduction for state and local taxes by filling out Line 5 in Form 1040 Schedule A. You can also take a tuition and fees deduction by completing Form 8917. Educators can get a tax break on expenses by completing Form 1041, Line 23 or Form 1040A, Line 16.
Alternative Minimum Tax Exemption Raised for 2008 Tax Return Filing
The AMT was raised to $69,950 for married couples filing jointly, $34,975 for a married person filing separately, and $46,200 for single individuals and heads of households. The alternative minimum tax uses a different set of rules for determining taxable income and deductions, and may not be applicable to all tax payers; check with your tax advisor to find out your best options.