Friday, January 30, 2009

New Tax Perks For Your 2008 Return

It is getting to be tax time again, and this year, there are many, many changes. Rollins & Associates, P.C. can easily guide anyone through the issues, but below are some of the "tax perks" that may be frequently overlooked in 2008.

First, it is important to remember that homeowners have seen plenty of tax changes in recent years. For instance, those who don't itemize now have access to an extra standard deduction for property taxes paid, up to $500 for single filers and $1,000 for married-filing-joint filers. And homeowners who went through a foreclosure on their primary residence won't owe income tax on the forgiven mortgage-loan debt.

Recovery Rebate Credit

You call it the "stimulus payment," but the IRS says "recovery rebate credit." If you weren't eligible for the full payment -- or any at all -- last year, you may get more money now if a layoff or investment losses slashed your income, because the stimulus checks sent in 2008 were based on 2007 returns. The credit starts phasing out with adjusted gross income over $75,000 for single filers and $150,000 for married-filing-jointly filers.

Also, if you had a baby in 2008 you may be eligible for the additional $300 stimulus payment per child. Or if your college-age child now supports herself, she might qualify for up to $600. See this IRS page for more on claiming recovery rebate credit.

AMT Relief on Incentive Stock Options

Taxpayers who've struggled to pay the alternative minimum tax owed on incentive stock options -- exercising an ISO can result in an unexpected AMT bill -- got some good news in 2008: You don't owe the tax.

Also, Congress sped up the process by which taxpayers can take a credit against regular tax for previous AMT bills, among other provisions. See this IRS page for more information.

Perks for Higher-Income Taxpayers

Even as some wonder whether Congress will allow the 2001 tax cuts to expire in 2010, some of those tax cuts are still going into effect.

Higher earners' ability to take itemized deductions and personal exemptions is limited -- those perks phase out at higher incomes. But thanks to the 2001 tax cuts, those phase outs themselves were slowly eliminated starting in 2006. (In 2010, higher-income taxpayers enjoy these perks with no reduction at all, but as with the other tax cuts, this one expires after 2010.)

In 2008, higher-income earners will find their itemized deductions and personal exemptions are cut by just one-third the amount in effect before the tax cuts.

The phase-out on deductions starts at adjusted gross income of about $159,950 for most filers and on exemptions at $159,950 for single filers and $239,950 for married-filing-jointly.

First-time Home Buyer Credit

If you're a first-time home buyer who bought a home after April 8, 2008, and before July 1, 2009, you may qualify for a credit of 10% of the purchase price up to $7,500 on your 2008 tax return. If you buy the home in 2009, you may still be able to take a credit on your 2008 return.

The credit is more like a loan and must be repaid over 15 years. The stimulus bill under consideration now may eliminate the repayment rule for homes bought in 2009, but what's not clear yet is -- if the new stimulus plan does eliminate the repayment rule -- will people who bought a home in 2009 but claimed the credit on their 2008 return be exempt from repaying the credit? (Those who take the credit on homes bought in 2008 will have to repay the credit, under current law.)

If you buy a home in 2009 (before the July 1 deadline), your best bet is to wait until the final bill gets signed into law to see whether to claim the credit on your 2008 return or to wait and claim it next year.

Harvest Business Loss

It's not a new perk but plenty of business owners may find themselves ready and eager to take advantage now of the loss carryback that allows them to use a net loss in 2008 to offset a profit from up to two years ago -- and collect a refund for the difference.

Keep an eye on the new stimulus bill being discussed now: The loss carryback perk may get extended to five years, up from two years now.

Note that perks on your federal return may not apply to your state tax bill.

Mileage Rate

The IRS raised the standard rate for deducting mileage to 58.5 cents per mile for July through December, up from 50.5 cents from January through June. That compares with 48.5 cents in 2007.

For 2009 though, the IRS moved it back down to 55 cents due to the drop in gasoline prices. As long as gasoline fluctuates, it looks like it will fluctuate as well.

Sources: MarketWatch, IRS

No comments: