New Tax Law Changes for Your 2008 Federal Income Taxes

January 10, 2008 By Matthew Paulson

Every year there’s a slew of new tax businesses that open in malls and vacant stores around the country. They’ll stay open until the beginning of May and then disappear for the rest of the year. As much as we like to make taxes seem much more complicated than they actually are, it’s pretty easy to do your own taxes unless you own a business or have some very complicated financial dealings going on. To get you started, here’s what’s changing for the tax return you’ll be filing in 2008.

New Tax Brackets, Higher Standard Deductions & Higher Personal Exemptions – Tax Brackets and the standard tax deduction increase every year by the rate of inflation. You’ll also be able to deduct more for each of your dependent family members as the amount of money you can deduct for a personal exemption has increased as well. This mean that you’ll end a smaller amount of taxes if you made the same amount of money as you did last year. You can view information about this year’s tax brackets here.

Increased Business Mileage Rates – You’ll be able to deduct more of depreciation if you own a vehicle and use it for business purposes. In 2007 you could deduct 48.5 cents per mile, and in 2008 you’ll be able to deduct up to 50.5 cents per mile.

New Rules for Charitable Giving – The IRS is attempting to clamp down on fraudulent charitable giving this year by making it so that you cannot deduct a cash donation unless you can provide a record of the contribution. These records include a notice from the charity, a cancelled check, or a bank statement.

Limits on Itemized Deductions for the Wealthy - If you and your spouse make more than $159,950 or if you are single and make more than $79,975 this year, you may lose a portion of your itemized deductions.

Increased Roth IRA Contribution Limits – In 2007 you could deposit up to $4,000 into a Roth IRA and have the investment be completely tax free. In 2008, you will be able to deposit up to $5,000 and have all of the earnings on that money be tax free. Those over 50 can deposit up to $6,000 this year as their catch-up contribution.

Better Tax Breaks for College Students – The amount of money that your family can make and still be qualified for the Hope & Lifetime Learning credit increases to a sliding scale between $47,000 and $57,000 in 2007 and between $48,000 and $58,000 in 2008.

Improved Adoption Credits – Taxpayers can now deduct a maximum credit of $11,390 when they adopt a child. You must make less than $210,000 to qualify for any or all of this credit.

PMI is now deductible – If you had to purchase private mortgage insurance as part of your mortgage, you will now be able to deduct the amount you pay.

Increases in Alternative Minimum Tax Limits – The alternative minimum tax limits were raised for the taxes filed on 2007 income by a bill in congress late last year. This number will drop down significantly next year unless congress reforms the legislations

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