Highlights of the 2008 Tax Changes

New Tax Brackets
The income tax rates are the same as lasy year, however the IRS has adjusted the income tax brackets for inflation. view tax brackets

Increase in Personal Exemptions
In 2008 the personal exemption per family member amount increases to $3,500 from $3,400 in 2007. The exemption deduction begins to be phased out where you would lose all or part of this deduction if your income exceeds the following limits:

•   $119,975 for married filing separately
•   $159,950 for singles
•   $199,950 for heads of household
•   $239,950 for married filing jointly and qualifying widow(er)s with dependent children.

Standard Deduction Amount
In 2008 the standard deduction amount, if taxpayers do not itemize their deductions, increases. The deduction increases to the following in 2008:

•   $8,000 for head of household
•   $10,900 for married filing jointly and qualifying widow(er)s
•   $5,450 for singles or married filing separately

* Remember that married taxpayers filing separately must both itemize their deductions or both claim the standard deduction.

Business-Mileage Rate Goes Up

Every year, the Internal Revenue Service adjusts the standard mileage rate for automobile use for business purposes or charitable activities, or for moving or medical expenses. This year, the IRS raised the mileage rates for the second half of 2008 because of the rapid run-up of gasoline prices in the first half of the year. The national average price of gasoline peaked at $4.114 on July 17, 2008, according to AAA's Daily Fuel Gauge Report.

For mileage driven between Jan. 1, 2008 and June 30, 2008, the standard mileage rates are:

• 50.5 cents a mile for business use
• 19 cents a mile for medical or moving expenses
• 14 cents a mile for driving in charitable activities

For mileage driven between July 1, 2008 and Dec. 31 2008, the standard mileage rates are:

• 58.5 cents a mile for business use
• 27 cents a mile for medical or moving expenses
• 14 cents a mile for driving in charitable activities

New Homeowners Property Tax Break

This new tax break gives taxpayers who don't itemize their deductions -- but do owe property taxes -- a little break for 2008 and 2009.

If you're one of those taxpayers, you can deduct the lower amount of the property tax bill or $500 for single taxpayers and up to $1,000 for joint filers.

Alternative Minimum Tax Exemption Rises for 2008

The AMT is a parallel tax system that can take away some breaks and potentially hit taxpayers with huge bills.

To reduce the number of taxpayers getting hit by the tax, Congress has expanded the income levels under which the tax cannot be applied.

For 2008, the AMT exemption will rise to:

• Married couples filing jointly: $69,950 ($34,975 for married couples filing separately).
• Singles and heads of households: $46,200.

Adoption Credit Rises for 2008

The maximum adoption credit for families rises to $11,650 in 2008.

The credit for adopting children with special needs rises to $11,650.

Also, a taxpayer can exclude from gross income as much as $11,650 for amounts paid or expenses incurred under his employer's adoption-assistance program.

The credit starts to be phased out when adjusted gross income hits $174,730 and will be phased out completely when it exceeds $214,730.

Popular Break for Teachers Extended in 2008

This break, good for 2008 and 2009, lets teachers claim up to $250 of unreimbursed expenses as a deduction. And they don't have to itemize.

First-Time Homebuyers Receive a New Tax Credit

The credit is worth $7,500, but you have to buy a house by June 30, 2009.

A new credit is available for primary homes purchased between April 9, 2008, and June 30, 2009.

The credit is 10% of the purchase price of the home, with a maximum credit of $7,500 for either a single taxpayer or a married couple filing jointly.