By: Ahsan Bashir - Texas Insurance Advisors-MyTexasAgent.com

2008 Tax Tips

Whats new for the tax year?

Recovery Rebate & avoiding a common Error
As we approach the peak of the tax season, per IRS records, more than 15% of the tax returns initially filed were submitted with an incorrect Rebate amount for the prior year. To calculate the recovery rebate correctly, you must submit your 2008 Tax return with the correct Stimulus Payment received in the prior year. There are two ways to find out the correct Stimulus Amount received in the prior year.

(a) Visit the IRS Website
 https://sa.www4.irs.gov/irfof/IRServlet?app=IRACTC&selectLanguage=en

(b) Individuals can call the IRS at 1-866-234-2942. After a brief recorded announcement they can select option one to find out the amount of their economic stimulus payment. They will need to provide their filing status, Social Security Number and number of exemptions.

Some of the major factors that could qualify you for the recovery rebate credit include:

  • Your financial situation changed dramatically from 2007 to 2008.
  • You did not file a 2007 tax return.
  • Your family gained an additional qualifying child in 2008.
  • You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed as dependent by someone else in 2008.

Increased Standard Deduction
If you choose to use the Standard deduction vs the Itemized deduction, following are the Standard Deduction rates for the tax season:
(a) Single or amrried filing seperately: $5450.00
(b) Married filing jointly or qualifying widow (er): $10,900.00
(c) Head of Household: $8000.00

Increased Standard Mileage Deduction
If you use your vehicle for business, you may be eligible to deduct your vehicle expenses. You can choose either to write off the actual expenses incurred or a standard mileage deduction per the IRS regulations. For the 2008 Tax year, following are the standard mileage deduction rates.
(a) January 1st 2008 thru June 30th, 2008: 50.5 cents a ile
(b) July 1st 2008 thru December 31st, 2008: 58.50 cents a mile

First-time Homebuyer Credit
The Housing and Economic Recovery Act of 2008 provides a new refundable tax credit for individuals who are qualified first-time homebuyers of a principal residence in the United States. The provision applies to a principal residence purchased by the taxpayer on or after April 9, 2008, and before July 1, 2009. Homebuyers who qualify are allowed a one-time credit against their income tax for the year of purchase. Unlike some past credits, this one must be repaid over a 15-year period. As a result, the new tax credit works like an interest free loan. You take the full credit in either 2008 or 2009, and then repay the credit amount in equal payments over 15 years, with no interest charges. 

A "first-time homebuyer" is any individual (and spouse if married) who had no present ownership interest in a qualifying principal residence during the 3-year period ending on the date of purchase of the principal residence for which a first-time homebuyer credit is being claimed. 

The following taxpayers do not qualify for the first-time homebuyer credit:

  • A homebuyer who qualifies for the District of Columbia First-time Homebuyer Credit in the year of purchase or in any prior year
  • A homebuyer whose home was financed by the proceeds of tax-exempt mortgage revenue bonds
  • A homebuyer who is a nonresident alien
  • A homebuyer who disposes of the residence (or it ceases to be the taxpayer's principal residence) before the close of a taxable year for which a credit otherwise would be allowable

The term "purchase price" means the adjusted basis of the principal residence on the date such residence is purchased.

The initial credit for qualified buyers is equal to 10% of the purchase price of the principal residence, but cannot exceed $7,500 ($3,750 for married individuals filing a separate return).

The credit phases out for individuals with modified adjusted gross income (MAGI) between $75,000 and $95,000 ($150,000–$170,000 for joint filers) for the year of purchase. The credit is completely phased out for an individual with a MAGI equal to or more than $95,000 ($170,000 for joint filers).

To determine the allowable credit, subtract the limit threshold of $75,000 ($150,000 in the case of a joint return) from your MAGI. Divide the difference by $20,000 to get your reduction ratio. Multiply your initial credit by your reduction ratio to arrive at the credit reduction amount. Subtract the credit reduction amount from the initial credit to arrive at the allowable credit amount.




 

Posted 11:22 PM  View Comments

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