2008 IRS Released Tax Law Changes

Recovery Rebate Credit	Top
For tax years beginning in 2008, taxpayers can claim a refundable credit figured in the same manner as the economic stimulus payment, except that the amounts are based on tax year 2008 instead of tax year 2007. The amount of the credit is reduced by any economic stimulus payment received in 2008. If the credit is less than the payment received, the difference does not have to be repaid.
Increased Standard Deduction Amounts	Top
Single or Married Filing Separately * Increased to $5,450 Head of Household * Increased to $8,000 Married Filing Joint or Qualifying Widow(er) * Increased to $10,900
Increased Standard Deduction for Real Property Taxes	Top
For 2008 only, the standard deduction is increased by amount of otherwise deductible real estate taxes up to $500 ($1,000 if married filing jointly) on Form 1040A. Real estate taxes deducted in arriving at AGI cannot be included.
Increased Exemption Amount	Top
The exemption amount has increased to $3,500 times the number on line 6D of Form 1040.
Elimination of Form 8453-OL	Top
Beginning in January 2009, Form 8453-OL, U.S. Idividual Tax Declaration for an IRS e-file Online Return, will be obsolete and can no longer be used as an IRS e-file signature document. Taxpayers choosing to electronically prepare and file their return using an online software package will be required to use the Self-Select PIN method as their signature. The Self-Select PIN method is a fast and secure way to complete the electronic filing process. It allows taxpayers to sign their returns using a five-digit PIN and the prior year Adjusted Gross Income or the prior year PIN. Taxpayers must use Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, to send supporting documents that are required to be submitted to the IRS.
Expired Provisions	Top
Allowance of certain personal tax credits against AMT. **Deduction for educator expenses in figuring AGI. **Tuition and Fees Deduction. **Deduction for state and local general sales taxes. Nonbusiness energy property credit. The exclusion from income for certain IRA distributions made directly to a charity. (**) Re-enacted by legislation when H.R.6049 Bill was passed by Senate on Tuesday, September 23rd. These items will be listed on the 2008 Form 1040.
New Tax Credits	Top
Agricultural chemicals security credit (new Form 8931). The credit is 30% of qualified security expenditures paid or incurred after May 22, 2008, by sellers, distributors, and manufacturers of specified agricultural chemicals. The credit is limited to $100,000 per facility. Credit for employer differential wage payments (new Form 8932). The credit is 20% of differential wage payments made after June 17, 2008. Credit is available only to eligible small businesses and is limited to $4,000 per employee. Credit to holders of certain forestry conservation bonds (added to Form 8912).
Increase in Alternative Minimum Tax Exemptions Amount	Top
Single or Head of Household * Exemption has been increased from $44,350 to $46,200 Married Filing Jointly or Surviving Spouse * Exemption has been increased from $66,250 to $69,950 Married Filing Separately * Exemption has been increased from $33,125 to $34,975
Other Alternative Minimum Tax Changes	Top
Tax-exempt interest on certain housing bonds issued after July 30,2008, is exempt from alternative minimum tax. A state or local bond subject to a guarantee made after July 30, 2008, by a federal home loan bank in connection with the original issuance of that bond is eligible for treatment as a tax-exempt bond.
Tax Rate on Net Capital Gain and Qualified Dividends	Top
Maximum tax rate on net capital gain and qualified dividends is reduced from 5% to 0% for taxpayers in the lowest two tax brackets for tax years after 2007. The 15% rate remains unchanged. New 0% rate applies for both regular tax and AMT.
IRA Contribution Limit	Top
The contribution limit for traditional and Roth IRAs has increased to the lesser of: $5,000 ($6,000 for taxpayers age 50 or older at the end of the year), or Taxable compensation.
Rollovers To Roth IRAs	Top
After 2007, rollovers from the following plans can be made to a Roth IRA (In addition to a traditional, SEP, or SIMPLE IRA): A qualified pension, profit-sharing or stock bonus plan (includig a 401(k) plan), An annuity plan, A tax shelter annuity plan (section 403(b) plan), or A deferred compensation plan of a state or local government (section 457 plan). The rollover is subject to the same rules that apply for converting a traditional IRA into a Roth IRA.
Phase-Out of Reductions of Personal Exemptions and Itemized Deductions	Top
For 2008, the amount by which these amounts can be reduced is only 1/3 of the amount that would otherwise apply. Example: The maximum reduction for the $3,500 personal exemption for 2008 is $1,167. The minimum exemption allowed after the phase-out is $2,333.
Kiddie Tax Rules	Top
The "Kiddie Tax" rules (reflected on Forms 8615 and 8814) are expanded to cover: A child who is age 18 the end of the year and whose earned income is not more than half of the child's support, and A student who is under age 24 at the end of the year and whose earned income is not more than half of the child's support.
First-Time Homebuyer Credit	Top
First-time homebuyers can claim a refundable tax credit of up to $7,500 ($3,750 if married filing separately) for homes purchased after April 8, 2008, and before July 1, 2009. They can elect to treat a 2009 purchase as a 2008 purchase and claim the credit in 2008. The credit is phased out ratably over a $20,000 range for taxpayers with AGI over $75,000 ($150,000 if married filing jointly). Functions as a 15-year interest-free loan, with 1/15th of credit recaptured annually beginning 2 years after year of purchase. The credit will be claimed on new Form 5404.
Exclusion on Sale of Main Home	Top
Individuals can elect to postpone the running of the 5-year test period for ownership and use for up to 10 years starting in 2008 while the individual or his or her spouse is serving outside the United States in the Peace Corps. For sales and exchanges after June 17, 2008, members of the intelligence community that elect to postpone the running of the 5-year test period no longer are required to move to a duty station outside the United States. For sales after 2007, the maximum exclusion on the sale of a main home by an unmarried surviving spouse is $500,000 if: The sale occurs no later than 2 years after the date of the other spouse's death, The ownership and use requirements for joint filers were met immediately before the date of such death, and During the 2-year period ending on the date of such death, there was no sale or exchange of main home by either spouse which qualified for the exclusion.
Exclusion for Emergency Responders	Top
For tax years 2008 through 2010, gross income does not include the following, provided by a state or local government: rebates or reductions of property or income taxes for providing services as a member of a qualified emergency response organizations. Qualified payments (up to $30 per month) for providing services as a member of a qualified emergency response organization. The excluded income reduces any related tax or contribution deduction.
Special Depreciation Allowance	Top
New 50% additional first-year special depreciation allowance applies to most new property purchased and placed in service after 2007. To be eligible, the property must be property with a recovery period of 20 years or less, off-the-shelf computer software, qualified leasehold property, or water utility property. The special allowance does not apply if the ADS method is required. The taxpayer may elect out for any class of property. The allowance is figured after the section 179 deduction and before regular depreciation. If the special allowance applies, the limit on depreciation and section 179 deduction for automobiles is increased by $8,000.
Section 179 Expense Deduction	Top
Maximum increases to $250,000 ($285,000 for enterprise zone and renewal community businesses; $350,000 if qualified section 179 Gulf Opportunity Zone Property). Phase-out begins when section 179 property exceeds $800,000 ($1.4 million if qualified section 179 Gulf Opportunity Zone Property).
Self-Employment Tax	Top
Thresholds for farm and nonfarm optional methods increased to allow electing taxpayers to secure four credits of coverage each year. For 2008, lower limit increased from $1,600 to $4,200, and upper limit increased from $2,400 to $6,300. Conservation Reserve Program payments excluded from net SE earnings for farmers receiving social security benefits included on new line 1b. Line 1b: If you received social security retirement or disability benefits, enter the amount of Conservation Reserve Program payments included on Schedule F, line 6b, or listed on Schedule K-1 (Form 1065), box 20, code X.
Increase in Meal Expense Limit for Certain Transportation Workers	Top
For 2008, workers who are subject to the Department of Transportation hours of service limits can deduct 80% of business meals consumed during, or incident to, any period of duty when those limits are in effect. This includes certain air transportation workers, interstate truck operators, interstate bus drivers, certain railroad workers, and certain merchant mariners.
Gulf Opportunity Zone Relief	Top
If a taxpayer claimed a deduction for a casualty loss for a main home damaged in Hurricane Katrina, Rita, or Wilma, and received a grant under certain specified federal laws to reimburse the loss in a later year, the taxpayer can file an amended return for the year the casualty loss was deducted and reduce the loss by the amount of the reimbursement. * Amended return must be filed by the later of the due date of the return for the year the grant was received or July 30, 2009. * No interest or penalties if the tax is paid within 1 year of the date the amended return was filed. The December 31, 2007, deadline for starting construction of self-constructed Gulf Opportunity Zone extension property for 50% bonus depreciation purposes is repealed. The placed in service date is unchanged.
Tax Relief for Taxpayers Affected by Kansas Storms and Tornadoes	Top
The following disaster-related tax benefits are extended to certain taxpayers affected by the May 4, 2007, storms and tornadoes in the Kansas disaster area and are explained in detain in new Pub. 4492-A provided by the IRS: Elimination of the $100 and 10% limits on personal casualty losses. Extension of the replacement period for gain non-recognition from 2-5 years for involuntary conversions of property in the disaster area. Additional 50% first-year depreciation for qualified recovery assistance property acquired after May 4, 2007. Maximum section 179 expense deduction increased by $100,000 for qualified section 179 recovery assistance property. Deduction of 50% allowed for certain demolition and clean-up costs. Special 5 year carryback for NOLs to the extent of certain specified amounts related to the disaster. Relief similar to the relief granted for the Hurricane Katrina disaster for the use of retirement funds.
Tax on Nonresident Aliens	Top
The exemption from tax on certain interest-related dividends and short-term capital gain dividends paid to a nonresident aliens by a regulated investment company does not apply to any tax year of the company beginning after 2007. U.S. citizens who relinquish their citizenship after June 16, 2008, are treated as having sold all of their property at fair market value on the day before the expatriation date. An election to defer the tax owed on the deemed sale of the property may be made if adequate security is provided.
Other Tax Relief Provisions	Top
For tax years beginning after 2007, the current year refundable credit for prior year minimum tax cannot be less than the prior year refundable credit (before the AGI phase-out). An individual receiving a military death gratuity or a Servicemembers' Group Life Insurance payment can roll that amount over to a Roth IRA or Coverdell ESA without regard to any contribution or income limits. the rollover must be made within 1 year of receipt of the payment (or within 1 year after June 17, 2008, if later). The provision applies to deaths from injuries occurring after October 6, 2001.