AMT:
AMT patch was expanded to $46,200 ($69,950 MFJ) up from $44,350
($66,250 MFJ) in 2007. Child and Dependent care credits, education
and home energy credits allowed for both regular and AMT.
CHILD TAX CREDIT:
The income threshold for the Additional Child Tax Credit has been
lowered to $8500 for the tax year 2008 only. This makes the
Additional Child Tax Credit available to lower income taxpayers.
LONG TERM
CAPITAL GAINS:
The 5% net long term capital gain rate drops to 0% for those taxpayers
who are in the 10% or 15% tax brackets.
REAL
PROPERTY TAXES:
Non itemizers may claim an additional standard deduction for the state
and local real property taxes paid for tax years 2008 and 2009. The
maximum deduction is $500 single and $1000 MFJ.
REFUNDABLE FIRST TIME HOMEBUYERS
CREDIT:
Taxpayers who purchased a principal residence after April 8, 2008, through
June 30, 2009, who have not owned a principal residence in the previous
3 years may claim a refundable credit for 10% of the purchase price.
The maximum credit is limited to $7500 ($3,750 MFS). Eligibility of the
credit phases out for modified AGI between $75,000 and $95,000
($150,000-$170,000 MFJ). The refundable credit is repaid over a 15
year period starting in 2010.
RECOVERY
REBATE CREDIT:
The rebate that was paid in 2008 will be reconciled on the 2008 tax return.
Taxpayers will receive any additional credit due, but don’t need to repay
any excess credit received.
KIDDIE TAX:
Kiddie tax now applies to children who are younger than 18, children
who are 18 unless they provide more than half of their own support based
upon earned income, and children who are 19 to 23 and full time students,
unless they provide more than half of their own support based upon
earned income. Children who qualify for the Kiddie Tax will pay
taxes at the parents tax rate.
DEPRECIATION:
The maximum section 179 deduction for tax years starting in 2008
has been increased to $250,000. A phase-out of this amount starts
when more than $800,000 of qualifying property is placed into service
during the tax year. Additional first year 50% bonus depreciation
is the default provision for property placed in service in 2008.
WIND ENERGY PROPERTY CREDIT:
The credit is expanded to include small wind energy property which uses
a small wind turbine to generate electricity. The maximum credit is $4,000.
SECTION 179 EXPENSE:
The maximum 179 deduction for tax years starting in 2008 is $250,000. A
phase-out of this amount starts when more than $800,000 of qualifying property
is placed into service during the tax year. (Special rules apply to certain
disaster areas).
CASUALTY LOSSES-FEDERALLY DECLARED DISASTER AREA:
The 10% AGI reduction does not apply to personal casualty losses that
occurred in a federally declared disaster area. In addition, these losses
may be claimed as an additional standard deduction (no need to itemize).
Applies to disasters occurring in 2008 and 2009.
MIDWESTERN DISASTER AREA RELIEF:
Significant relief is available to victims of the 2008 severe storms and
flooding that occurred in the Midwest. Special relief is provided for
losses that occurred in the core areas of those disasters.
EXTENDERS:
SALES TAX DEDUCTIONS
TUITION AND FEES DEDUCTION
EDUCATOR EXPENSES
CHARITABLE DISTRIBUTIONS:
Taxpayers age 70 ½ or older, may contribute up to $100,000 tax-free
from an IRA, to a qualified charity. The transfer is taken into account
in determining the required minimum distribution for the year.
NON BUSINESS ENERGY PROPERTY CREDIT:
Reinstated for 2009;
Credit up to $500 for energy efficient home improvements to a main residence
limited to 10% of the cost of building envelope improvements (insulation,
exterior windows and doors, etc) and various dollar amounts for qualifying
heating and hot water equipment. In addition, qualifying home heating
property (max $300 credit) is expanded to include energy efficient biomass
fuel stoves (Corn stoves for example).
CREDIT FOR ENERGY EFFICIENT APPLIANCES:
The credit is extended and the definition of qualified appliances is expanded.
The credit amount for appliances manufactured after 2007 is modified.
Extended for appliances manufactured through December 31, 2010.
CHILD TAX CREDIT:
The child tax credit is refundable to the extent of the greater of either:
15% of earned income above the $8500 annual threshold. (2008 only) In the
case of the individual with 3 or more qualifying children, the excess
Social Security taxes paid over the Earned Income Credit on the return.
NEW OR MODIFIED TAX PROVISIONS AFFECTING 2009 AND LATER TAX YEARS:
Property tax deduction for non itemizers extended through 2009.
The energy credit for solar and fuel cell heating is extended through
2016. The credit is expanded to include residential small wind energy
equipment and geothermal heat pumps as qualifying property. Lifetime
home energy credit is extended to 2009 only.
The exclusion from taxable income of qualified principal residence
indebtedness is extended for qualifying discharges of debt through 2012.
A new credit for plug in vehicles is available 2009-2014. The credit is a
base amount of $2,500 plus an additional $417 per kilowatt hour in
excess of 4 kilowatts per hour.
Starting in 2009, employers may provide a limited fringe benefit for
bicycle purchase, repairs parts and storage costs to employees who
commute by bicycle. The maximum annual benefit is $240.
For 2009, certain farm machinery and equipment may be depreciated
over 5 years.
Starting with stock acquired in 2011, brokers will be required to report
investors’ adjusted basis and gain or loss on the sale of investments.
OTHER CHANGES:
Standard deduction increase:
Single - $5450
MFS - 5450>
HOH - 8000
MFJ - 10900
Mileage deduction:
Business mileage-50.5 cents per mile
Charitable - 14 cents per mile
Medical - 19 cents per mile
Moving - 19 cents per mile
Maximum earned income credit for families with 2 or more children:
$4824.
Qualifying income limit for the credit for joint filers with 2 or more
children: $41646
HOPE CREDIT:
New maximum credit is now $1800 up from $1650 in 2007.
CONTRIBUTIONS TO RETIREMENT ACCOUNTS:
Annual contributions to 401K and 403B plans ($15,500 plus catch up provisions
of $5000). Simple plans $10,500 plus catch up provisions of $2,500.
