Tax Deductions and Personal Exemptions for 2008
March 19, 2009
Death and taxes are constants in life. I think one other thing you can count on is that the tax rules will change every year. Yesterday we looked at the first time home buyer tax credit and differences in the tax brackets for 2008. Today we’ll cover changes in personal exemptions, standard deductions, and your retirement accounts.
Personal Exemptions
The personal exemption — which you claim for yourself and each dependent — is $3,500 for 2008, up $100 from the previous tax year. If you are in the 25 percent bracket, it will save you $25 for each exemption you claim.
Standard Deduction
The standard deduction will rise for each filing status. Singles get a $100 hike from 2007, to $5,450. Married couples filing jointly see their standard deduction rise to $10,900, $200 more than they claimed on 2007 returns.
The standard deduction for heads of household who do not itemize deductions increases $150, to $8,000. If you do not itemize, and paid real property taxes, you will be able to increase your standard deduction by $500. if single, $1,000 if married filing jointly.
Disaster Damage Tax Relief
The severe storms, tornadoes and hurricanes from spring through fall designated a surprisingly large number of counties around the nation as eligible for tax relief. To check if your community has been designated, go to the IRS website.
Retirement Accounts
If you and your spouse file jointly, by contributing to a traditional IRA each of you might be able to deduct up to $5,000 if you were under 50 by the end of 2008. If you were older by yearend, that deduction rises to $6,000. Keep in mind this deduction may be allowed (but may be limited) if you both were “active participants” in a retirement plan and your 2008 modified adjusted gross income (AGI) is less than $105,000 if married filing jointly or you are a qualifying widow or widower (or $63,000 if single).
If one of you is an active participant (check your W-2) and the other is not, then the one who is not active may still be allowed to make a deductible contribution if modified AGI is less than $169,000. Contributions must be made prior to the required filing date for your return. Some employer qualified plans may also allow large employee deductions prior to year’s end—if you can afford to make one, check with your plan administrator.
This post on changes in tax deductions and exemptions is produced in association with the Financial Planning Association (FPA), the leadership and advocacy organization connecting those who provide, support and benefit from professional financial planning.
[...] a question a reader emailed in after reading about the First Time Home Buyer Credit and other tax deduction changes we covered the last two [...]
[...] Tax Deductions and Personal Exemptions for 2008 – It’s tax time, and the April 15th deadline is quickly approaching. If you haven’t started already, now is the time to get going on your taxes. Before you file, make sure you go over all of the available tax deductions and personal exemptions for 2008. [...]
[...] Tax Deductions and Personal Exemptions for 2008 – It’s tax time, and the April 15th deadline is quickly approaching. If you haven’t started already, now is the time to get going on your taxes. Before you file, make sure you go over all of the available tax deductions and personal exemptions for 2008. [...]
[...] Tax Deductions and Personal Exemptions for 2008 @ Money Smart Life [...]
Where do you look on your W-2 to determine if you are an “active participant” in a retirement plan. Does this mean 401K plans? Or pension plans? or my weird mandatory participation in a state plan? How do you tell?
[...] presents Tax Deductions and Personal Exemptions for 2008 posted at Money Smart [...]