Jennifer Hack Accounting Services
HomeExperiencePricingcontact Information
(Tax year 2008)

Adoption
*Please let me know if you have adopted a child.
  Alternative Minimum Tax
The exemption amount has increased to the following:
  • Single — $46,200
  • Married filing jointly — $69,950
  • Married filing separately — $34,975
  Archer MSA Limits Increased
  • Minimum annual deductible health plan increases to $1,950 ($3,850 family)
  • Maximum annual deductible health plan increases to $2,900 ($5,800 family)
  • Maximum out-of-pocket expenses limit increases to $3,850 ($7,050 family)
  Charitable Contributions
  • Cash Contributions – You must have a bank record (i.e. canceled check, bank copy of canceled check, bank statement containing the name of the charity, date and the amount) or a written communication from the charity. The written communication from the charity must include the name of the charity, date of the contribution, and the amount of the contribution
  Child’s Investment Income
Increase in age of children whose investment income is taxed
at parent's rate. The rules regarding the age of a child whose investment income may be taxed at the parent's tax rate will change for 2008. These rules will continue to apply to a child under age 18 at the end of the year but, beginning in 2008, will also apply to:

  • A child who is age 18 at the end of the year and whose earned income is not more than half of the child's support, and
  • A student who is under age 24 at the end of the year and whose earned income is not more than half of the child's support.

The amount of taxable investment income these children can have without it being subject to tax at the parent's rate has increased to $1,800 for 2008. For 2007, the amount was $1,700.
  Earned Income Amount for Additional Child Tax Credit
For 2008, the minimum earned income amount used to figure the additional child tax credit has decreased to $8,500.
  Earned Income Credit Amounts Increase
*In order for me to evaluate whether or not this applies, please provide me with your date of birth.

You may be eligible to take EIC if:
  • A child lived with you and you earned less than $33,995
    ($36,995 if filing jointly)
  • More than one child lived with you and you earned less than $38,646
    ($41,646 if filing jointly)
  • A child did not live with you and you earned less than $12,880
    ($15,880 if filing jointly)

The amount of the credit increase:
  • $2,917 if you have one qualifying child
  • $4,824 if you have more than one qualifying child
  • $438 if you don’t have a qualifying child
  Income Limits Increased for Reduction of Education
Savings Bond Exclusion
For 2008, the amount of your interest exclusion is phased out if your:
  • MAGI is between $100,650 and $130,650
    (married filing jointly or qualified widower)
  • MAGI is between $67,100 and $82.100
    (for all other filing statuses)
  Exclusion of Income for Volunteer Firefighters and Emergency Medical Responders
*Please let me know if you qualify
  Exclusion from Income for Certain Cancellation of Debt on Principal Residence
The Mortgage Forgiveness Debt Relief Act of 2007 allows individuals to exclude from gross income a discharge of qualified principal residence indebtedness. This exclusion applies to discharges made after 2006 and before 2010. Additionally, the basis of the principal residence must be reduced (but not below zero) by the amount excluded from gross income.
  Exemptions Increase
The value of each personal and dependency exemption is $3,500, up $100 from 2007. Most taxpayers can take personal exemptions for themselves and an additional exemption for each eligible dependent. An individual who qualifies as someone else’s dependent cannot claim a personal exemption, and though personal and dependency exemptions are phased out for higher-income taxpayers, the phase-out rate is slower than in past years.
  First-Time Homebuyer Credit
Those who bought a main home recently or are considering buying one may qualify for the first-time homebuyer credit. Normally, a taxpayer qualifies if she didn’t own a main home during the prior three years. This unique credit of up to $7,500 works much like a 15-year interest-free loan. It is available for a limited time only –– on homes bought from April 9, 2008, to June 30, 2009. Income limits and other special rules apply.
  Health Savings Accounts (HSAs)
  • High deductible health plan. (HDHP) For HSA purposes, the minimum annual deductible of an HDHP remains at $1,100 ($2,200 for family coverage) and the maximum annual deductible and other out-of-pocket expenses limit increases to $5,600 ($11,200 for family coverage).
  • Deductible limitation on contributions. The annual deductible limitation for contributions to your HSA based on the amount of your health insurance deductible is repealed. For 2008, the maximum HSA deduction increases to $2,900 ($5,800 for family coverage) regardless of the amount of your health insurance deductible. The maximum additional deduction for individuals age 55 or older increases to $900.
  Hope & Lifetime Learning Credits – Income Limits Increase
For 2008, the amount of your Hope or lifetime learning credit is phased out (gradually reduced) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim an education credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return).

Hope credit. Beginning in 2008, the amount of the Hope credit (per eligible student) is the sum of:
  1. 1. 100% of the first $1,200 ($2400 if a Midwestern disaster area student). of qualified education expenses you paid for the eligible student, and
  2. 2. 50% of the next $1,200 ($2400 if a Midwestern disaster area student). of qualified education expenses you paid for that student.

The maximum amount of Hope credit you can claim in 2008 is $1,800 ($3600 if a Midwestern disaster area student) per student
  Itemized Deductions – AGI Limits Increase
If your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. In 2008, this amount is increased to $159,950 ($79,975 if married filing separately). Beginning in 2008, the amount by which these itemized deductions are reduced is only of the amount of the reduction that otherwise would have applied.
 

Long-Term Care Premiums
For 2008, the maximum amomt of qualified long-term care premiums you can include as medical expenses has increased.

  • Age 40 or under - $310.
  • Age 41 to 50 - $580.
  • Age 51 - 60 - $1,150.
  • Age 61 - 70 - $3,080.
  • Age 71 or over - $3,850.

Note: The limit is for each person.
  Maximum Tax Rate on Qualified Dividends and Net Captial Gain Reduced
For tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain (the excess of long-term capital gain over short term capital loss) is reduced to 0%. The 15% maximum tax rate on qualified dividends and net capital gain has not changed.

In general, this reduction applies to investors whose taxable income is below:

  • $65,100, if married filing jointly or qualifying widow or widower
  • $32,550, if single or married filing separately or
  • $43,650, if head of household
 

Recovery Rebate Credit
This credit is figured like last year's economic stimulus payment, except that your 2008 tax information is used to figure this credit. Your 2007 tax information was used to figure your economic stimulus payment. The maximum credit is $600 ($1,200 if filing jointly) plus $300 for each qulaifying child.

You may be able to take this credit only if:

  • You did not get an economic stimulus payment, or
  • Your economic stimulus payment was less than $600 ($1,200 if filing jointly for 2007), plus $300 for each qualifying child you had for 2008.
  Retirement and IRA Contribution Limits Rise
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 (AGI) between $53,000 and $63,000, compared to $52,000 and $62,000 last year.

For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $85,000 to $105,000, up from $83,000 to $103,000 last year.

Where an IRA contributor who is not covered by a workplace retirement plan is married to someone who is covered, the deduction is phased out if the couple’s income is between $159,000 and $169,000, up from $156,000 and $166,000 in 2007.

The phase-out range remains $0 to $10,000 for a married individual filing a separate return who is covered by a retirement plan at work.

The worksheet in the instructions for Form 1040 Line 32 or Form 1040A Line 17 can help a taxpayer figure the IRA deduction.

For 2008, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b) and most 457 plans remains unchanged at $15,500. This limit rises to $16,500 in 2009. The catch-up contribution limit for those aged 50 to 70-½ remains at $5,000 in 2008 but rises to $5,500 in 2009.

The AGI phase-out range for taxpayers who contribute to a Roth IRA is $159,000 to $169,000 for joint filers and qualifying widows and widowers, compared to $156,000 to $166,000 in 2007. For singles and heads of household, the comparable phase-out range is $101,000 to $116,000, compared to $99,000 to $114,000 in 2007.
  Social Security & Medicare Taxes
For 2008, the employer and employee will continue to pay:
  • 1. 6.2% each for social security tax
    (up to $102,000 of wages are subject)
  • 2. 1.45% each for Medicare tax
    (all wages are subject)
  Standard Deduction
The basic standard deduction is:

  • $10,900 for married couples filing a joint return and qualifying widows and widowers, a $200 increase over 2007
  • $5,450 for singles and married individuals filing separate returns, up $100 and
  • $8,000 for heads of household, up $150

Higher amounts apply to blind people and senior citizens. The standard deduction is often reduced for a taxpayer who qualifies as someone else’s dependent.

New this year, taxpayers can claim an additional standard deduction, based on the state or local real-estate taxes paid in 2008. Taxes paid on foreign or business property do not count. The maximum deduction is $500, or $1,000 for joint filers.
  Standard Mileage Rates
For 2008, the standard mileage rate for the cost of operating your car for business use is:

  • 50.5 cents per mile for the period January 1 through June 30, 2008, and
  • 58.5 per mile for the period July 1 through December 31, 2008.

For 2008, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is:

  • 19 cents per mile for the period January 1 through June 30, 2008, and
  • 27 cents per mile for the period July 1 through December 31, 2008.

For 2008, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.
  Student Loan Interest
For 2008, the amount of the student loan interest deduction is phased out (gradually reduced) if your filing status is married filing jointly and your modified adjusted gross income (MAGI) is between $115,000 and $145,000. You cannot take the deduction if your MAGI is $145,000 or more.

For all other filing statuses, your student loan interest deduction is phased out if MAGI is between $55,000 and $70,000. You cannot take a deduction if your MAGI is $70,000 or more.
 

Wage Threshold for Household Employees
*Please let me know if you have a household employee


The social security and Medicare wage threshold for household companies is $1,600 for 2008. This means that if you pay a household employee cash wages of less than $1,600 in 2008, you do not have to report and pay social security and Medicare taxes on that employee's 2008 wages.