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Important Stimulus Rebate
Information:
Many taxpayers did not
qualify, or qualified for a reduced
rebate
based upon their 2007 income tax return
for reasons such as too much income, or
too little earned income. If your
tax situation has changed in 2008, you
may be able to recover the remaining
rebate that was previously disallowed.
Also, if a taxpayer has a newborn baby
in 2008, the taxpayer may qualify for an
additional $300 rebate in 2009. For
parents who alternate the dependency
exemption, there is good news; the
parent claiming the dependent in 2008
may still qualify for a rebate of $300
even though the other parent received
the rebate for the same child in the
previous year. Above
the Line Deduction for Real Estate Taxes
Paid: For tax year 2008 only,
single taxpayers who do not
itemize may be able to claim a deduction
up to $500 ($1,000 if married filing
joint) for real estate taxes paid on the
taxpayer's principal residence.
Credit for Energy Efficient Home
Improvements: There will be NO
credit available in 2008 for energy
efficient
home improvements. The credit will
be in effect once again beginning
January 1st, 2009 and ending December
31st,
2009. If you have not already met the
maximum lifetime credit limit, consider
waiting until 2009 to install your
qualified energy efficient improvements.
1st Time Homebuyer Tax Credit:
For a primary residence purchased
between April 9th, 2008 and July 1st,
2009, a credit of $7,500 may be
available on your federal income tax
return. This credit is refundable,
meaning if
you have a tax liability of $5,000 for
2008, you could receive up to a $2,500
refund. The credit is available to
first
time homebuyers only (those who have not
owned a primary residence in the
preceding 3 years). This credit,
however, must be repaid to the IRS over
a 15 year time span in 15 equal payments
beginning 2 years from the year
the credit was claimed. Think of
this credit as an interest free loan.
Please click here
for additional information
(you will be redirected to a 3rd party
website).
Foreclosure Relief: For tax
years 2007, 2008, and 2009, up to $2
million of debt forgiven on the
foreclosure
one's primary residence is eligible to
be excluded from taxable income.
The debt forgiven that is excluded from
income will reduce the taxpayer's basis
in the property. This could result
in a capital gain if the gain on the
foreclosure exceeds the section 121
exclusion limits ($250,000 for single
filers and $500,000 for married filing
joint.
| Mileage Deduction
Rates: |
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| Business Miles (January
1st - June 30th, 2008): |
50.5 cents per mile |
| Business Miles (July 1st
- December 31st. 2008): |
58.5 cents per mile |
| Charitable Contribution: |
14.0 cents per mile |
| Medical Travel: |
19.0 cents per mile |
Hope & Lifetime
Learning Credit: The maximum
credit for 2008 will be $1,800, up from
$1,650 in 2007. The
credit will be dollar for dollar on the
first $1,200 of qualified expenses, and
50% of the next $1,200. The
maximum
Lifetime Learning Credit will remain at
$2,000 (20% of qualified educational
expenses up to $10,000).
If a taxpayer (or dependent) attends a
school located in a federal disaster
area that qualifies for individual
assistance, the maximum Hope Credit will
double. Also, 40% of qualified
educational expenses up to $10,000 may
be used in determining the Lifetime
Learning Credit. In addition, room
and board, as well as books, can be
included as qualifying expenses.
To determine if
you or a dependent attend a school in a
federal disaster area eligible
for individual assistance please click
here (you will be redirected to a 3rd
party website).
If the school is located in
a county highlighted in orange or red,
the taxpayer will qualify for the higher
credits. Only the location of the
school
is relevant; it does not matter where
the student lives.
Capital Gain Exclusion On Vacation and
Rental Property Conversions:
Under current tax laws, when a
vacation or rental property is converted
to a principal residence and later sold,
a portion of the gain on sale may be
subject to tax even if the taxpayer
would otherwise qualify under the
Section 121
Exclusion. The amount
subject to
tax is based on the fraction of time
after 2008 that the property was used as
a vacation or rental property over the
total time the property has been owned
by the taxpayer. For example,
assume a taxpayer purchased a vacation
home in the year 2001, converted the
property to a principal residence in
2011, and sold the property in 2015.
The
percentage of gain subject to tax will
be 13.3% (2/15). Under
previous law, a taxpayer would have
qualified for
the full
Section 121
Exclusion as long as he/she
lived in the property for 2 of the last
5 years.
Section 179 Deduction: The
maximum Section 179 deduction for tax
year 2008 will be $250,000. This
expensing limit will be reduced if the
cost of qualifying property placed into
service in 2008 exceeds $800,000.
Bonus Depreciation: 50%
bonus depreciation on qualifying
property is back! Bonus
depreciation can generally
be claimed on tangible property that is
placed into service new in 2008 and has
a recovery period of less than 20
years. Bonus depreciation can also
be claimed on
qualified
leasehold improvements and
purchased software.
Combine Bonus Depreciation with the
Section 179 deduction for maximum first
year expensing.
0% Adjusted Net Capital Gain Rate:
For tax years 2008 thru 2010,
certain capital gains and qualified
dividends
may not be subject to federal income
tax. If a taxpayer falls in the
10% or 15% tax bracket before
considering the
Adjusted Net Capital Gain (ANCG), then
the ANCG up to the top of the 15%
bracket when combined with
ordinary income, will not be subject to
tax. The amount of ANCG exceeding
the 15% bracket will be subject to a
15% tax rate. For most taxpayers,
the ANCG will simply be the sum of the
net capital gains from the sale of
stocks,
bonds and mutual funds, and qualified
dividend income.
| Example:
(Married Filing Joint) |
|
| Wages: |
$50,000 |
| Interest
Income: |
$1,000 |
| Adjusted Net
Capital Gain: |
$40,000 |
| Standard
Deduction: |
$10,900 (see
above Tax Table) |
| Exemptions: |
$7,000
(see above) |
| Taxable
Income Ignoring ANCG: |
$33,100
($50,000+$1,000-$10,900-$7,000) |
| Top of 15%
Tax Bracket (2008): |
$65,100 (see
above Tax Table) |
Since the taxpayers are
within the 15% bracket ignoring the ANCG,
$32,000 of the ANCG will avoid federal
income tax, calculated as follows:
| Top of 15%
Bracket: |
$65,100 |
|
Less Taxable Income Ignoring ANCG: |
$33,100 |
| |
$32,000 |
The remaining ANCG of
$8,000 ($40,000-$32,000) will be subject
to a 15% tax rate.
Deduction For Private Mortgage
Insurance (PMI): The itemized
deduction for PMI will be extended thru
2010. To qualify for the
deduction, the purchase or refinance of
a primary or 2nd residence giving rise
to the PMI
must have occurred after January 1st,
2007. The deduction is phased out
for taxpayers with Adjusted Gross
Income (AGI) exceeding $100,000.
The deduction is reduced by 10% for
every $1,000 above $100,000. The
deduction is completely phased out when
AGI exceeds $109,000.
2008 WISCONSIN TAX UPDATES |
Taxation of Social
Security Benefits: Beginning
in 2008, Wisconsin will no longer
collect income tax on social
security benefits.
Deduction for Health Insurance
Premiums Paid: For tax year
2008, a taxpayer who has no employer and
no self-employment income may subtract
from Wisconsin income 2/3 of the health
insurance premiums paid. A
Self-employed taxpayer and employed
taxpayer whose employer does not
contribute toward the cost of his or her
health insurance will be allowed to
subtract 100% of the health insurance
premiums paid. A taxpayer whose
employer pays only a portion of the cost
of the medical care insurance may be
eligible for a subtraction equal
to 10% of the premiums paid by the
taxpayer. The premiums paid by the
taxpayer must be paid from after tax
funds (not thru a cafeteria plan).
The amounts subtracted from Wisconsin
income for medical care insurance cannot
be included when calculating the
itemized deduction credit.
Property Tax Credit For Certain
Veterans Or Their Spouses: A
credit equal to 100% of the real estate
tax
paid on a principal residence will be
available for veterans over age 65 with
a 100% service related disability,
un-remarried spouses of veterans killed
in duty, or spouses of deceased veterans
with a 100% disability rating and
over age 65 when they died.
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