WHAT'S NEW IN THE 2008 TAX YEAR?

 

Standard Deduction & Exemptions

 
  • In 2008, the personal exemption amount is $3,500.

    Personal & Dependent Exemptions:

    For the tax year beginning in 2008, you will be able to deduct $3,500 for each personal or dependency exemption on your tax return. The law gradually phases out the tax benefits of your exemptions as income exceeds certain levels.

    Personal exemptions are reduced by two percent for each $2,500 by which the taxpayer’s adjusted gross income (AGI) exceeds the amount shown below for his or her filing status.

    2008 Phase-out:

    MFJ,QW: $239,950 – 362,450

    HH: $199,950 – 322,450

    Single: $159,950 – 282,450

    MFS: $119,975 – 181,225

    The basic standard deduction for married taxpayers filing jointly and qualifying widow(er)s has increased to $10,900 (twice that of single filers).

    The standard deduction for married taxpayers filing separately has increased to $5,450 (the same as that of single taxpayers).

 

Earned Income Tax Credit

  For 2008, the maximum amount of the credit is $4,824 for a taxpayer with two or more qualifying children, $2,917 for a taxpayer with one qualifying child, or $438 for a taxpayer without a qualifying child.
 

Auto Mileage Rate

  You can claim deductions for the business-related use of an auto using either the standard mileage rate method or the actual expense method.

In 2008, the following standard mileage rates may be used instead of claiming actual expenses (Rev. Proc. 2006-49).
Standard Mileage Rates for 2008

  • Business Mileage: 50.5 cents (Jan - June) and 58.5 cents (July - Dec)
  • Medical and Moving Mileage: 19 cents (Jan - June) and 27 cents (July - Dec)
  • Charitable Mileage: 14 cents
  • Moving Mileage: same as medical

    The business standard mileage rate may not be used if:

    The vehicle has been depreciated using a method other than straight-line, such as MACRS or ACRS.
    The taxpayer claimed a §179 deduction for the vehicle.
    The taxpayer claimed bonus depreciation for the vehicle.
    The vehicle is used for hire (hiring of property), such as a taxicab.
    The taxpayer is using five or more vehicles simultaneously, such as in fleet operations.

    •  

    Energy Property Credit

      In 2006-07 taxpayers were eligible to claim a credit for making their home more energy efficient. The maximum lifetime credit was $500. If you did not take the maximum credit in 2006 and 2007, you can't use it for 2008.
     

    Section 179

      The §179 limitations for 2008 are as follows.

    2008 Maximum §179 deduction $250,000

    Phase-out begins when §179 property exceeds $800,000


    SUVs
    Sport utility vehicles (SUVs) with a gross vehicle weight rating (GVWR) in excess of 6,000 pounds are exempt from the luxury automobile limitations under §280F. However, the maximum amount that can be expensed under §179 for any SUV placed in service after October 22, 2004, is $25,000 [§179(b)(6)]. For this purpose, an SUV is defined as a four-wheeled vehicle with a GVWR of more than 6,000 pounds but not more than 14,000 pounds.

     

    Educator's Credit

      The educator expense deduction expired at the end of 2007.
     

    Charitable Tax Deduction Rules

      To use charitable giving donations as a tax deduction, it’s important to know that rules about the deductibility of contributions have changed and took effect as of August 17, 2006, with the passage of the Pension Protection Act of 2006. The changes apply to noncash donations after August 17, 2006. For most calendar-year taxpayers, that means they are effective in 2006. The bulk of the changes can be summed up in a single word: receipts.

    Changes regarding cash/monetary contributions:
    Donors must have a bank record, a receipt, or written communication from the donee showing the organization name, date of the contribution, and amount for all contributions of money, regardless of the amount.

    Changes regarding noncash contributions:
    Individuals, partnerships, or S corporations may only donate clothing or household items in good used condition, or better. Exception is for single items of more than $500 value that include a qualified appraisal, even if the item is not in good used condition. The IRS may deny deductions for items of minimal monetary value such as used socks and undergarments.

    The changes affect everyone who contributes to charitable organizations at any level. Church-goers who used to put cash in the collection plate each week must now either write a check or take advantage of the church's envelope system.
    Essentially, the message is “get a receipt” for every donation you wish to claim as a charitable contribution, starting immediately. Another good idea is to take photos of your donations. Every bit of substantiation helps.

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