Upcoming Tax Changes for the 2008 Filing Season

The IRS has published changes in legislation which may affect your taxes this year. And let’s admit the inevitable, in a time of recession and economic hardships for all classes of taxpayers, we could all use some tax breaks for the coming filing season.

Take some time to look through the following changes and see if any of these will affect your tax liability reduction.

Additional Child Tax Credit

The income threshold for the Additional Child Tax Credit has been lowered to $8,500 for tax year 2008 only.

0% Capital Gain

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 Tax Deduction

Non-itemizers may claim an additional standard deduction for state and local real property taxes paid. The maximum deduction is $500 ($1,000 MFJ).

Refundable First-time Homebuyer

Credit Taxpayers who purchased a principal residence after April 8, 2008, through June 30, 2009, and 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 $7,500 ($3,750 MFS). Eligibility for the credit phases out for modified AGI between $75,000–$95,000 ($150,000–$170,000 MFJ). Note: The credit must be repaid in 15 equal installments starting in 2010. Repayment is accelerated if the home is sold or no longer used as a principal residence.

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 on earned income, and children who are 19 to 23 and full-time students — unless they provide more than half of their own support based on earned income.

Depreciation

The maximum Section 179 deduction for tax years starting in 2008 has been increased to $250,000. A phaseout of this amount starts when more than $800,000 of qualifying property is placed in service during the tax year. Additional first-year 50% "bonus" depreciation is the default provision for property placed in service in 2008.