Income Tax Changes for 2008, 2009 & 2010
by Milton Gugenheim
Another year has rolled by and here we are approaching income tax filing again. This year we have some late changes. They are for the good. Some were worried that Congress would not extend expired items, but they did. However what happens in congress in 2009 is any one’s guess.
What’s New for 2008?
1. Economic stimulus payment: If you did receive a payment in year 2008, you may be eligible on your 2008 income tax return. The criteria are the same as in 2008. If you received a payment in 2008 and claim a payment in 2009, the IRS will send you letter in the fall requesting repayment plus interest.
2. Inflation Adjustments: The following items have been adjusted:
Standard deduction plus real estate tax and net disaster loss.
Earned income credit (EIC).
Alternate minimum tax (AMT).
Traditional IRA & Roth income limits.
Retirement saving contributions.
Credit limits on itemized deductions.
Hope or life time learning income limits, and Social Security tax on earned income.
3. Extended Tax provisions: The following tax provisions that were scheduled to expire at the end of 2007 have been extended.
- Educator expense in figuring adjusted gross income.
- Itemized deduction for state and local general sales tax.
4. Mileage Rates: Your car $0.5055/mile to July 1, $0.585 thru Dec 31. Medical $0.19/mile to July 1, $0.27/mile thru Dec 31. Charitable organization $0.14mile.
5. Property Tax: If you do not use Schedule A (itemized deductions), you may add to the standard deduction a maximum of $500 – single, $1000 – married filing joint.
What’s New for 2009?
1. Estate and Gift Taxes: Increased to $3.5 million but the rate is still 45%. In 2010, the estate tax is scheduled to disappear for one year.
2. Annual gift-tax exclusion: increased to $13,000.
3. Retirement Savings: 401K- under 50, to $16,500 over 50, $5000 for a total of $20,500
4. Minimum distributions: people 70 1/2 or older can skip taking distribution from IRA and other certain retirement plans during 2009. (Details not available)
5. Social Security Taxes: max amount increased on wages.
6. Mileage Rates: Your car $0.55/mile. Medical $0.24/mile. Charitable organization $0.14mile.
7. E-File: All tax payer with certain limits.
What’s New for 2010?
- Roth IRA: No income tax limits on Roth conversions, and for 2010 conversions, your taxes can be spread across 2011 and 2012.
IRS Pub 17 2008
IRS 1040 Instruction 2008
Wall St Journal January 7, 2008, page D1
Wall St Journal January 10, 2008 page B2
Tax Programs Reviewed
Turbotax and TaxCut for tax year 2008 are essentially the same format as tax year 2007. The base data has been updated and all changes in the tax law are included. Three tax programs are reviewed elsewhere in this issue…the above two plus TaxAct.
Milton Gugenheim is a HAL-PC member and has been an AARP Tax Aide Instructor and Local Coordinator for over sixteen years. He may be contacted at firstname.lastname@example.org.