Lowrance Law, LLC

Taxes 2008–What Is New

January 5, 2009

IRS has published the Form 1040 that individuals file for their 2008 tax returns.  Yes, it is time to think about filing your 2008 individual income tax return. The normal due date is April 15, 2009. There a some new changes this year. IRS publishes the new Form 1040, along with instructions, every year. The instructions are, believe it or not, organized and easy to read.

Many people are talking about the economic stimulus payment, recovery rebate credit and withdrawal of your stimulus payment from a tax favored account, see my favorite tax blogger Taxgirl.  You should read the IRS 1040 instructions, page 6, for some plain talk explanations. Click Here

Any stimulus payment you received is not taxable for federal income tax purposes, but it may reduce your recovery rebate credit. What? The recovery rebate credit, you ask. The credit is available if, for some reason, you did not receive a stimulus payment in 2008 and meet other requirements.  In the instructions there is a full explanation and a somewhat workable “worksheet.”  Also, see Recovery Rebate Credit Here

Other new items:

First time home buyer:  If you bought a home after April 8, 2008, and before July 1, 2009, and did not own a main home during the prior 3 years, you may be able to take the “first time home buyer credit.”  The single largest provision in the $15.1 billion package of housing tax incentives in the recently enacted Housing Assistance Tax Act of 2008 (the “Housing Act”) is a measure allowing individuals buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified home buyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds the tax. However, they are then required to pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government.

The IRS standard mileage rate for business use of your vehicle in 2008 is 50.5 cents per business mile driven through June and 58.5 cents per business mile thereafter.  The standard mileage rate for 2009 is 55 cents.  You will need to allocate your automobile expenses between business and personal use based on miles driven during the year. Proper recordkeeping is crucial in the event of an IRS challenge.

If you received an economic stimulus payment last year that was directly deposited to a tax favored account and you withdrew the payment by the due date of your return (including extensions), the amount withdrawn will not be taxed.  Good news, eh?

Of course, I must tell you that all of the above information is general in nature. It is not meant to tax advice or a legal opinion. Always consult a tax professional before thinking that information here is a “slam dunk” for tax advice.

Bill Lowrance

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