Tax Changes 2008
Standard Mileage Rate
For business driving from January 1 - June 30, 2008: 50.5/c a mile. For July 1 - December 31, 2008: 58.5/c.
For medical and moving mileage from January 1 - June 30, 2008: 19/c a mile. For July 1 - December 31, 2008: 27.0/c.
For charitable driving from January 1 - June 30, 2008 stays at 14.0/c a mile. For July 1 - December 31, 2008: 14.0/c.
Capital Gain Tax Rate Reduction
For 2008 the 5% capital tax rate is reduced to zero. This will apply to taxpayers in the 10% and 15% tax brackets in 2008 who either have qualified dividend income or long term capital gain income. This 0% rate will only apply to capital gain income that fits into these lower brackets. If the capital gain income pushes you into the 25% or higher brackets the portion that falls into these higher brackets will be taxed at the 15% rate.
College Credit
Hope Education Credit can be as much as $1,650 based on the tuition paid for the first two years of post secondary education. The student must be enrolled in a program that leads to a degree or certificate and they must be taking at least one-half the normal full time course load.
The Lifetime Learning Credit will provide a tax credit for 20% of educational expenses up to $10,000. The maximum credit available per year is $2,000 regardless of the number of students and applies to the post secondary education expenses of you, your spouse and your dependents. The credit is eligible for most educational expenses from graduate degree courses to noncredit courses that help acquire or improve job skills. There is also no limit on the course load. One course is all that is necessary to be eligible.
Educator Expenses
The educator expense deduction of qualified expenses has been extended to 2008 and 2009. The deduction is limited to $250 of an educator's out-of-pocket ordinary and necessary classroom related expenses.
Forgiveness of Mortgage Debt
A new law has passed that may allow distressed homeowners to exclude from income part or all of the mortgage debt forgiven on a principal residence. This applies for debt forgiven in 2007 through 2009.
Retirement Savings Bonus:
The maximum amount that can be contributed to either an Individual Retirement Account or to a company 401(k) plan is higher once you reach 50 years of age. For tax year 2008, the maximum IRA contribution that a person age 50 or older can make is $6,000 as opposed to $5,000 for everyone else. If the plan allows it, the maximum contribution for a company 401(k), 403(b), SEP, and 457 plan is $20,500 for age 50 or older in 2008.
Section 179
The maximum section 179 deduction you can elect for property placed in service in 2008 will be $128,000. This amount will be reduced when the cost of section 179 property placed in service during the year exceeds $510,000.
Social Security Maximum
The maximum amount of wages or self-employment earnings that will be subject to the social security tax will increase to $102,000 in 2008.