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Be prepared or pay Uncle Sam

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By The Staff

It was a turbulent year for many of Americans, but we must be resilient and carry on. One of our chores is to gather our tax information to prepare for the 2008 tax filing season.

As most taxpayers in the Corridor are aware, the Internal Revenue Service revises its tax codes annually and it’s difficult to keep up with the changes. Here are some new and revisited items that will affect your 2008 tax return.

Additional standard deduction for real estate property tax: (New)

Non-itemizers who paid for real estate property taxes can claim an extra standard deduction equal to the lesser of the actual taxes paid or $500 – single – $1,000 for married filing jointly.

0 percent rate may apply to 2008 capital gains: (New)

For taxpayers with a top bracket of 10 percent or 15 percent, the 5 percent rate that applied to most long term gains before 2008 drops to zero percent for 2008 through 2010; that is the gains will be tax free.

Even taxpayers with the top bracket exceeding 15 percent may be able to benefit from the 0 percent rate, depending on their filing status, taxable income, and amount of eligible long term gains and qualified dividends. To the extent that the 0 percent rate is not applicable, the 15 percent maximum rate on long term gains generally applies.

Recovery rebate credit:

Individuals who did not receive the maximum available economic stimulus payment in 2008 based on their 2007 return may be able to claim a credit on their 2008 return.

Surviving spouse’s home sale exclusion: (New)

A surviving spouse who sells a home after 2007 may claim the maximum $500,000 exclusion on the sale within two years after the death of his or her spouse, provided that the $500,000 exclusion would have been available by the couple immediately before the spouse’s death.

Cancellation of debt: (New)

You should receive Form 1099-C from a federal government agency, credit union or bank that cancels or forgives a debt you owe of $600 or more. The amount of debt forgiven must be reported as “Other Income” if you do not qualify for exclusions.

Long-term care premiums – limits allowed as medical expenses:

Age 40 or under $ 310.

Over 40 but not over 50 $ 550.

Over 50 but not over 60 $ 1,150.

Over 60 but not over 70 $ 3,080.

Over 70 $ 3,850.

Health savings accounts (HSAs):

Individuals with qualifying high deductible health plans coverage may contribute up to $2,900 for 2008 if the coverage is self-only, $5,800 for family coverage. The limit is increased by $900 for (HAS) owners over age 55 or older.

Contributions:

Contributions must be documented. To take a deduction you must have receipts, canceled checks or other documented evidence of the contributions. The fact that you donated X-number bags of clothes or other items to a charity does not suffice. Make a list of every item donated and a fair cost or value of the item.

Example you can’t say an item is worth $20.00 when if sold it would only bring $2. If the return is audited, the deduction will not be allowed unless there is documented proof.

Car mileage expenses:

Like contributions this must also be documented. For Business miles you must have:

Beginning miles – odometer reading on Jan. 1 and ending reading on Dec. 31 of the tax year, then a documented record of the business miles. The difference between total miles, less the business miles are personal use miles. All this must be documented.

Salvatore V. Le Donne, E.A., is a public accountant and tax preparer, and Corridor resident. For more information, call 291-2413 or e-mail sledonne@cfl.rr.com.