Stacie's Tax Stuff

Published by the IRS

Here are a few tax law changes you may want to note before filing your 2008 federal tax return:

1. Expiring Tax Breaks Renewed The following popular tax breaks were renewed for tax-years 2008 and 2009:
Deduction for state and local sales taxes on Form 1040 Schedule A, Line 5
Educator expense deduction on Form 1040, Line 23 or Form 1040A, Line 16
Tuition and fees deduction on Form 8917
In addition, the residential energy-efficient property credit is extended through 2016. In general, solar electric, solar water heating and fuel cell property qualify for this credit. Starting in 2008, small wind energy and geothermal heat pump property also qualify.

2. Standard Deduction Increased for Most Taxpayers The 2008 basic standard deductions all increased. They are:

$10,900 for married couples filing a joint return and qualifying widows and widowers
$5,450 for singles and married individuals filing separate returns
$8,000 for heads of household
Beginning this year, taxpayers can claim an additional standard deduction based on the state or local real-estate taxes paid in 2008. Also new for 2008, a taxpayer can increase his standard deduction by the net disaster losses suffered from a federally declared disaster.

3. Contribution Limits Rise for IRAs and Other Retirement Plans This filing season, more people can make tax-deductible contributions to a traditional IRA. The deduction is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes between $53,000 and $63,000. For married couples filing jointly, the income phase-out range is $85,000 to $105,000.

4. Standard Mileage Rates Adjusted for 2008 The standard mileage rates for business use of a vehicle:

50.5 cents per mile from Jan. 1 to June 30, 2008
58.5 cents per mile driven during the rest of 2008
The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:
19 cents per mile Jan. 1 to June 30, 2008
27 cents from July 1 to Dec. 31, 2008

The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents a mile. Special rates apply to the Midwest disaster area.

5. Kiddie Tax Revised The tax on a child’s investment income previously only applied to children younger than age 18. It now applies if the child has investment income greater than $1,800 and is:

Younger than 18

18 years of age and had earned income that was equal to or less than half of his or her total support in 2008

Older than 18 and younger than 24, a student and during 2008 had earned income that was equal to or less than half of his or her total support.

Links:
IRS FS 2009-1 Highlights of 2008 Tax Law Changes
Form 1040 instructions (PDF 941K)
Publication 526 Charitable Contributions

Published by the IRS

While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.

Some common examples of items that are not included in your income are:

Adoption Expense Reimbursements for qualifying expenses

Child support payments

Gifts, bequests and inheritances

Workers’ compensation benefits

Meals and Lodging for the convenience of your employer

Compensatory Damages awarded for physical injury or physical sickness

Welfare Benefits

Cash Rebates from a dealer or manufacturer

Economic Stimulus Payment received in 2008

Some income may be taxable under certain circumstance, but not taxable in other situations.

Examples of items that may or may not be included in your income are:

Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.

Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify. All other items—including income such as wages, salaries and tips—must be included in your income, unless it is specifically excluded by law. Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525, Taxable and Nontaxable Income from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).

Link
Publication 525, Taxable and Nontaxable Income (PDF 1178.2KB)