Money Saving Tax Tips

Tax Law Changes for 2008

Each year the United States tax code changes. Sometimes that change is big, and sometimes it’s not so big. Knowing the meaning of these changes can save you money come April 15th.

In 2008 there are several tax code changes that are worth mentioning. The first change of note is that the tax brackets, personal exemptions, and standard deductions have all been adjusted this year for inflation. If you add all these things up, it simply means that if you made the same amount of money this year as you did last year, you will have a smaller tax bill. In addition to this adjustment for inflation there are several new deductions that could put a hefty sum of tax money back in your wallet.

First-Time Home Buyer’s Credit

If you are a first time home buyer and you purchased your primary residence after April 8, 2008, you may qualify for a tax credit that could add up to 10% of up to $75,000 of the purchase price. This tax credit is, however, more like an interest-free loan than a true credit. The IRS requires that the money must be re-paid in full within fifteen years. The IRS will begin collection on the credit two years after the credit is claimed and if you sell the residence before the credit is repaid, the balance is due the following year. Also, if your modified adjusted gross income exceeds $150,000 for joint-filers or $75,000 for single-filers, you do not qualify for this credit. If you buy the home from a close relative or if you have owned a home during any of the three years prior to the purchase of the home, you also do not qualify for the credit.

Additional Standard Deductions for Property Taxes Paid

This year, tax-payers who file standard deductions rather than itemized deductions will be allowed to take up to $1000 for joint-filers and up to $500 for single-filers for real estate taxes paid.

Increased Expense Deductions for Businesses

A new law has increased the amount of equipment expense allowed to be deducted for 2008. Businesses will be allowed to expense $250,000 this year which is a $125,000 increase over 2007.

Reductions in Capital Gains and Dividend Tax Rates

For 2008, the maximum tax rate for long-term capital gains from the sale of assets held longer than one year by a person in the 10% or 15% tax bracket has been reduced from 5% to 0%. This reduction will be in force until 2010. The Dividends Tax has seen a similar reduction for 2008.

State and Local Sales Tax Deductions

Back for 2008 is the option to deduct state and local sales tax payments as opposed to income tax payments.

Tuition Deductions

The deduction of up to $4000 for college tuition has returned for 2008.

Frequently Overlooked Tax Deductions, Subtractions, and Credits

Out-of-pocket Charitable Contributions

Everyone knows that large charitable donations are tax deductible, but one of the often overlooked tax deductions is smaller, out-of-pocket charitable deductions. These expenses can be anything from stamps to food to the miles you drive as long as they involve charitable work. For mileage, the IRS allows you to deduct 14 cents per mile.

Travel Expenses for Military Reservists

If you travel more than 100 miles overnight from your home for your National Guard or Armed Forces Reserves duties you may deduct the cost of your hotel bill, half of the cost of your food bills, and any expenses incurred for tolls or parking. In addition, you are also allowed up to 50.5 cents per mile for the first half of the year and 58.5 cents per mile for the second half of the year.

Reinvested Dividends

If you have dividends from mutual funds that you reinvest into the fund, you can add these to your tax basis, which will in turn reduce your taxable capital gain when you redeem your shares.

State Taxes Paid in the Spring

Remember that if you owed money when you filed your 2007 state tax return you can include that amount with your state-tax deductions on your 2008 return.

It’s easy to miss a deduction when your filing your tax return, and every time you do you turn over more money to the IRS than you should. No one wants to overpay their taxes, so make sure you pay extra attention this year when filling out your tax returns.

Source

http://www.kiplinger.com/features/archives/2007//01/deductions.html

http://www.kiplinger.com/features/archives/2006/09/taxes.html

http://www.irs.gov/newsroom/article/0,,id=186831,00.html

http://www.irs.gov/publications/p529/ar02.html

http://turbotax.intuit.com/support/kb/tax-content/tax-tips/6395.html