Well, OK, maybe these changes aren’t secret, but they’ve certainly not been publicized very extensively….So here goes: some of the least-known tax savings tips for 2008.
1. No Tax on Some Capital Gains. Normally, capital assets held over one year, such as a property, are subject to 15% capital gains tax. For 2008 and 2009 ONLY, joint filers earning less than $64,100 and single filers making less than $32,500 pay NO capital gains. Hey, good one for the little guy!
2. Higher Standard Deduction: This one happens almost every year. Joint filers get $10,900 and single filers get $5,450 in 2008.
3. More IRA Contribution: In 2008 you can contribute $5,000 to your IRA or Roth IRA and $6,000 if you’re over 50.
4. More Retirement Breaks: Joint filers earning up to $85,000 can deduct their IRA; individuals earning up to $53,000.
5. More Time to Sell A Home If A Spouse Dies: Taxpayers who lose a spouse now have up to 2 years after the death to take the couple’s $500,000 capital gains tax exclusion on the principal residence.
6. Higher Gas Mileage Deduction: for business increases to 50.5 cents per mile, but moving or medical mileage stays at .19 cents a mile.
And now for the bad news:
1. Higher Social Security Cutoffs: Maximum earnings subject to social security tax is now $102,000 for 2009.
2. Taxes for Kids: Kids under 18 and full-time students under 24 will pay taxes at their parents’ rate for investment income over $1,700. The GOOD part: this doesn’t apply to kids’ wages.
3. Hybrids Get Smaller Break: Hybrids are so popular now–I wonder why? that the tax credit is phasing out on many popular models, such as the Prius. Check Hybrid List 2008 at the IRS before buying.