2008 Tax Law Changes
 Some of the tax changes you’ll see from the IRS are relief for first-time homebuyers, green tax credits and tax relief for areas of the Midwest affected by natural disasters. Here is a quick summary of some of the more significant changes:
Stimulus Payments are Tax-Free
If you received an economic stimulus payment in 2008, good news - you don’t need to report them on your taxes (i.e. they are not taxable). You still need to list the amount you received on your tax forms – it’s listed as the recovery rebate credit on line 70 on form 1040, and on line 42 on 1040A.
Note: Receipt of a stimulus payment can affect whether you are able to claim a Recovery Rebate Credit. You might be eligible for one if, for example, you had a child last year, or you didn’t receive an economic stimulus payment.
Alternative Minimum Tax Exemption is Increased
The Alternative Minimum Tax (AMT) applies only when certain types of income are earned. For 2008, the AMT levels increased slightly:
- $69,950 for married couples filing a joint return or qualifying widows and widowers (up from $66,250 in 2007)
- $34,975 for a married person filing separately (up from $33,125)
- $46,200 for singles or heads of household (up from $44,350)
If you make more than this amount, and if you take various deductions, you should spend a few minutes and use the IRS AMT Calculator to see if you owe the AMT. No, it’s not fun to do your taxes again, but until the tax law changes it’s your responsibility.
Green Tax Breaks
If you use solar power, solar water heating, fuel cells or wind energy on your property, you might qualify for the residential energy-efficient property credit. Some additions may allow up to $2,000 in credits. Use IRS form 5695 to claim it.
Got a hybrid? Are you the first owner? Check the Alternative Motor Vehicle Credit on the IRS site to see if you qualify.
Standard Deduction Increased for Most Taxpayers
In some cases, taxpayers choose to take the basic standard deduction rather than itemizing all of their deductions. The basic deduction has increased to:
- $10,900 for married couples filing a joint return and qualifying widows or widowers
- $5,450 for singles or married couples filing separate returns
- $8,000 for heads of household
First-Time Homebuyer Credit
If you bought a house recently or are considering buying one, you may be eligible for a first-time homebuyer credit worth up to $7,500.
Note: The credit is actually more like a no-interest loan because it must be repaid to the government over 15 years.
Tax Relief for Midwest Disaster Areas
The Heartland Disaster Tax Relief Act of 2008 was created to help Americans affected by the storms, tornados and flooding that struck the Midwest between May 20, 2008, and July 31, 2008. If you live in portions of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin and were affected by these events, be sure to examine some of the major provisions available to you.
Standard Mileage Rates Adjusted for 2008
Auto mileage can be expensed at:
- Business
50.5 cents per mile driven from Jan. 1, 2008, to June 30, 2008
58.5 cents per mile driven from July 1, 2008 to Dec. 31, 2008
- Medical / moving
19 cents per mile driven from Jan. 1, 2008, to June 30, 2008
27 cents per mile driven from July 1, 2008 to Dec. 31, 2008
- Charitable mileage rate is 14 cents per mile.
Farmer’s / Self-Employment Tax Changes
If you are self-employed, receive Social Security or disability benefits, and are eligible for the Conservation Reserve Program (typically for farmers and ranchers), you are exempt from the 15.3-percent social security self-employment tax. See the Farmer’s Tax Guide for use in preparing your 2008 returns.
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E-filing
 According to the IRS, 90 million people filed their taxes electronically in 2008. There are many advantages to e-filing your taxes – it’s easier, it reduces the risk of error and you’ll receive your refund faster (especially if you use direct deposit to receive your refund electronically). According to the IRS, e-filing is “virtually error-proof with an error rate of less than one percent.” There are three ways to e-file:
Go to a Tax Professional
See an authorized e-file provider who can electronically file e-files your taxes for you, usually at a fee. Fees may vary depending on the tax professional you choose and the specific services requested.
Do it Yourself on your Computer
Use purchased / free software on your home computer.
Free File (IRS)
If you made less than $56,000 in 2008, you can e-file your taxes directly with the IRS through their Free File program. It offers:
- Free service
- Services in English / Spanish
- Automatic accuracy checks
- Quick refunds (sometimes less than 10 days)
Note: Free File only works with your Federal taxes – you still need to file your state taxes.
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 Free Tax Help
There are lots of free tax help programs out there for people who need it. The IRS offers a guide of tax services. Some highlights:
Volunteer Income Tax Assistance Program (VITA)
VITA offers free tax help for low-to-moderate income earners ($42,000 and below) who cannot prepare their own returns. To locate the nearest VITA site, call (800) 829-1040.
Tax Counseling for Seniors
Free tax help for senior citizens from trained volunteers. Call (888) 227-7669 to locate an AARP Tax-Aide site in your neighborhood.
Low Income Taxpayer Clinics (LITCs)
LITCs provide help to low income taxpayers, either free or at nominal cost. Some non-English assistance provided. The IRS has more information on low income tax clinics in your area.
Military Personnel Resources
The Armed Forces Tax Council (AFTC) offers free tax help for members of the Army, Air Force, Navy, Marine Corps, and Coast Guard, and their families. Visit this IRS page for general information about notifying the IRS on overseas deployment, and learn about combat zone tax benefits and other items.
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The 2009 tax filing season is already gearing up. Here’s how to keep on top of important updates, especially in this difficult financial period.
