Three tax law changes that you should consider before filing your federal tax return for the 2008 tax season. Some tax breaks have been renewed, the standard deduction has been increased, contribution limits have risen for many retirement participants.
1. Tax Breaks Renewed
You can still take a tax break for the state and local taxes that you paid during the tax year on your federal return. If you are an educator, you can take a deduction of supplies you purchased on the front page of form 1040. And students can still take deductions for tuition and fees paid during 2008 on their tax return.
2. Your Standard Deduction is increased in most cases.
Increases in the standard deduction happened for many groups. For married couples and widows the new deduction is $10,900. For Singles and Couples filing separately, the deduction has been raised to $5,450. And finally heads of households can take a standard deduction of $8,000.
3. The amount you can earn and still contribute to your retirement account has increased.
If your modified income for 2008 is below $53,000 for singles and $63,000 for heads of household, then you can take a tax deduction for IRA contributions even if you have a 401k or 403b plan at work. And joint filing couples can earn up to $85,000 before you begin to be phased out.
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A number of tax credits which reduce your tax bill dollar for dollar that you might not have known about or might not have qualified for before are now worth taking a look at.
Income Tax Sappy (Photo credit: Wikipedia)
Recovery Rebate Credit
If the rebate checks that were sent out last tax season didn’t find their way to you because you made too much on your 2007 1040 tax return, you have a second opportunity to receive the credit for the 2008 tax season. Therefore, if you income has decreased for any reason during 2008, make sure to double check your qualifications this year so you can now claim the $600 per taxpayer credit.
First-Time Homeowner Credit
This is an interest free loan to anyone that purchased a house for the first time between April 9th of 2008 and June 30th of 2009. Loans are equal to 10% of the value of the home or a maximum of $7,500. You’ll have to pay back the loan over the next 15 years but a no interest loan from the government cannot be beat.
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