Will 2008 tax laws put you in the breeze or leave you high and dry?

Here are a couple of the most relevant changes that will affect or benefit most of you. If you want to read highlights on all the changes or you want more detail, the IRS web page has a great article.

In the Breeze
A first time home buyer credit of up to $7,500 is available for homes purchased from 4/9/08 – 6/30/09. “First Time” really means any individual who has not owned a home for the last three years. 

TIP: Consider purchasing a residence now to take advantage of historic low interest rates and this tax credit if you feel confident in your ability to keep your job or keep your business viable.

Popular tax deductions were renewed for 2008 and 2009. You will be able to continue to deduction state and local sales taxes, educator expenses and tuition and fees.

TIP: The Residential Energy Efficient Credit will be extended through 2016 and several types of property have been added: small wind energy and geothermal heat. Wait a year for non-business energy property like insulation, exterior windows, exterior doors, furnaces, water heater and other energy improvements to a main home.

High and Dry
Alert: The standard mileage rate for business was 50.5 cents per mile for the first six months and 58.5 cents for the remainder of the years. Mileage for medical and charitable amounts is treated similarly.

Kiddie Tax rules have changed. For some adult children over age 18, depending upon if they were a student or the relationship of the earned income to the total support, with unearned income over $1,800, they may find their income is taxed at the parent’s rate on the parent’s return.

TIP: Plan ahead for 2009 as the Alternative Minimum Tax exemption levels will go down next year. You may want to consider making potential sales that trigger this tax, like stock option sales, in 2008.

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