New Tax Breaks and Changes for 2008

Author(s): Katherine Butler

A lot has changed since April 15, 2008. Namely, the tax codes. There is a new standard property tax deduction and a special first-time homebuyer credit. Mileage rates are now two-tiered to account for the insane gas prices in early 2008. And happily, credits for things like adoption have risen. Here are the details on some of the new 2008 tax laws and changes.

The personal exemption levels have risen. The personal exemption per family member has risen $100 to $3,500.

The business mileage rate has risen. Because high gas prices for most of 2008 caused a drain on the average American household, you can deduct 58.5 cents per mile for business use from July to December 2008, as opposed to 50.5 cents per mile from January 2008 to June 2008.

Tax brackets have been adjusted for inflation. Thresholds for reaching a new tax bracket are slightly higher for 2008 than they were for 2007. If you earned the same amount both years, you'll pay a little less of it in taxes for 2008.

The standard deductions have gone up. If you are married filling jointly or a qualifying widow or widower, your deduction is $10,900. If you are a head of household, $8,000. If you are single or married filing separately, $5,450.

If you don't itemize but own a home, you get a property tax break. You can deduct the lower amount of the property tax bill or $500 for single taxpayers and up to $1,000 for joint filers.

First-time home buyers get a great tax break. If you buy a house before December 1, 2009, you can claim the credit on either your 2008 or 2009 tax return. Taxpayers can claim 10% of the purchase price up to $8,000, or $4,000 for married couples filing separately. The credit does not have to be repaid as long as the home remains the buyer's main residence for 3 years after purchase. For the record, a first-time home buyer is someone who has not owned a home in the previous three years.

The Alternative Minimum Tax (AMT) exemptions have risen. This is part of the bailout package that was passed in October 2008. This means married couples filing jointly have an AMT exemption amount of $69,950, with $34,975 each for married couples filing separately. For singles and heads of households, the AMT exemption amount is $46,200.

More specialized exemptions. The adoption credit has risen to $11,650 per family. Teachers can now deduct up to $250 in expenses that were not reimbursed. For college tuition, you may be able to deduct tuition and enrollment fees up to $4,000. Contribution limits were raised for Roth IRAs and some other retirement plans. There are tax breaks for Midwest disaster areas. And all economic stimulus payments are tax-free.

Bottom line: There are too many tax code changes to list them all here. Use these as a guide, but be sure to discuss your eligibility for these and other tax breaks with your tax professional.