WASHINGTON — If you’re a first-time homebuyer, victim of a natural disaster, or if you installed a small wind turbine in your backyard to generate electricity, you could find some tax relief when you file your 2008 return.
There also are new incentives to save for retirement, and some popular tax breaks have been renewed.
Start filling out your taxes, in fact, and you might find, “The IRS really gives me an opportunity to save some money this year,” said Jeff Schnepper, MSN tax expert and author of books on taxes and finance.
Knowing what to look for is key. “The tax code is convoluted, complicated, and even the tax pros aren’t sure,” he said.
Some of the changes this year are aimed at helping home owners — and stimulating the economy during what some analysts say could become the longest recession since the Great Depression.
First-time homebuyers are eligible for a maximum credit of $7,500. But there’s a catch: The credit is actually an interest-free loan that must be paid back over 15 years. If you take the full credit, you will have to pay back $500 a year. If you sell the house before the 15 years is up, the full amount will be due.
To qualify, taxpayers cannot have owned a home in the previous three years and must use the property as their principal residence. The home must have been purchased between April 8, 2008, and July 1, 2009.
If you were the victim of a federally declared natural disaster in 2008, you also can increase your standard deduction by your net loss.
For all taxpayers, the standard deduction is increasing — to $10,900 for married couples filing a joint return, $5,450 for singles and married people filing separately, and $8,000 for heads of household.
The value of a personal exemption also is rising: to $3,500, up $100 from 2007.
The higher standard deduction and personal exemption were put in place to account for inflation.
For those saving for retirement and covered by a plan at work, there was an increase in how much you can earn and still take a deduction for IRA contributions.
More people also could end up qualifying for the Earned Income Tax Credit, which is designed to offset the cost of Social Security contributions for low- and moderate-income workers. The credit is refundable — you still can get it even if you owe no tax. The IRS has estimated that a quarter of those eligible for the credit don’t take it.
Information about 2008 taxes, deductions and credits is available on the IRS website, .
Forms can be printed out at . index.html or can be ordered by calling 800-829-3676. If you’re using tax-preparation software, be sure to follow the links for updat ed forms.
Tax law changes
Some changes that may affect you as you file your 2008 income tax return:
Personal exemption
Each personal or dependent exemption is now worth $3,500, up $100 from 2007.
Standard deduction
For people who don’t itemize, the standard deduction for 2008 has increased to:
• $10,900 for married couples filing a joint return, and qualifying widows and widowers.
• $5,450 for singles and married individuals filing separate returns.
• $8,000 for heads of household.
On state or local real estate taxes, the maximum deduction is $500, or $1,000 for joint filers.
Net disaster losses from a federally declared disaster can increase the standard deduction.
Alternative minimum tax exemption rises to:
• $69,950 for a married couple filing a joint return and qualifying widows and widowers.
• $34,975 for a married person filing separately, up from $33,125.
• $46,200 for singles and heads of household, up from $44,350.
Under current law, these exemption amounts will drop to $45,000, $22,500 and $33,750, respectively, in 2009. Form 6251 and the AMT Calculator provide more information.
First-time homebuyer credit
• Up to $7,500 for purchase of a principal residence between April 9, 2008, and June 30, 2009.
• To qualify, you must be a first-time homebuyer or have not owned a home during the previous three years.
• The credit is actually an interest-free loan and must be paid back over 15 years.
Earned Income Tax Credit
The maximum earned income tax credit was raised to:
• $4,824 for people with two or more qualifying children.
• $2,917 for those with one child.
• $438 for people with no children.
Maximum income levels also are up:
• $41,646 for those with two or more children.
• $36,995 for people with one child.
• $15,880 for those with no children.
Capital gains tax
The 5 percent capital gains tax is reduced to zero for people with taxable income below:
• $65,100, if married filing jointly or qualifying widow or widower.
• $32,550, if single or married filing separately.
• $43,650, if head of household.
The Associated Press
Preparing for a preparer
Tips from the Internal Revenue Service on how to choose someone to prepare your tax return:
• Word of mouth: Get recommendations from family and friends.
• Check credentials: Does the person have the necessary training and certificates to prepare returns and/or represent you before the IRS if questions arise?
• Too good to be true? Be wary if the tax preparer claims to be able to get you a larger refund than other preparers.
• The fee: If it’s based on a percentage of the refund, look elsewhere.
• Beware of blanks: Avoid tax preparers who ask you to sign a blank return.
• Consider longevity: How long has the preparer been in business? Will he or she be there to answer questions after the return is filed?
• Documentation: The preparer should ask you for receipts to back up your deductions.
The Associated Press
