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Liberty Tax Covers Five Tax Changes Most Likely to Affect Your 2008 Tax Return

By: Liberty Tax Service |  1,022 Shares     336 Reads

January 20, 2009 // Franchising.com // (Virginia Beach, VA) The New Year 2009 has ushered in a host of tax changes, some that bring immediate benefits for consumers ready to ring in the year with some good news. Over 20 million Americans were spared additional taxes from the Alternative Minimum Tax, according to Liberty Tax Service. There's also "debt forgiveness" for some financially distressed homeowners, the opportunity for some homeowners to deduct some or all of their property taxes even if they don't itemize, and a first-time home buyer's credit.

"Incentives that help more people buy a first home can also mean these taxpayers will itemize for the first time, and be able to take deductions that they previously couldn't take," commented John Hewitt, CEO and Founder of Liberty Tax Service.

Alternative Minimum Tax Gets "Another Patch"

Due to tax provisions of the Emergency Economic Stabilization Act of 2008, the AMT has been "patched" again. For tax year 2008, the AMT exemption amounts will increase to $46,200 for single and head of household filers, $69,950 for married filing jointly or qualifying widower, and $34,975 for married filing separately. Taxpayers can also deduct nonrefundable personal credits in 2008 such as the child tax credit to reduce their AMT liability.

Extended Tax Relief for Some Financially Distressed Homeowners

Homeowners experiencing "short sales" and foreclosures will get an extended break for "debt-forgiveness" tax consequences. Instead of treating cancellation of acquisition debt as taxable income on the foreclosure of a principle home, no taxes will be levied on discharges of indebtedness of up to $2 million dollars for married taxpayers filing jointly, and of up to $1 million dollars for a married taxpayer filing a separate return.

Limited Property Tax Deduction for Non-Itemizers in 2008

This measure provides a break for taxpayers who pay local and state real estate taxes but do not itemize their deductions. The additional standard deduction for non-itemizers is the lesser of the amount of real estate taxes paid during the year or $500 for a single taxpayer or $1,000 for a married couple. This amount is added to the standard deduction of $10,900 for married filing jointly or qualifying widower, $8,000 for head of household and $5,450 for single and married filing separately.

"Kiddie Tax" Change Concerning Children's Investment Income

In 2008, the kiddie tax will still apply to children under 18. It will also apply to children age 18, or full-time students under age 24, unless the child's earned income exceeds half of his/her support or the child files a joint return. Their investment income will be taxed at the parents' rate. Children in these categories can earn no more than $1,800 in investment income before they are taxed.

First-Time Home Buyer's Credit

This new measure provides a maximum credit of up to $7,500.00 ($3,750.00 for married filing separately), or 10 percent of the home purchase price for eligible first-time home buyers who purchase residences between April 9, 2008 and July 1, 2009. This is a fully refundable credit that first-time home buyers can utilize even if they owe less in taxes than the credit amount of up to $7,500, or even if they don't owe any taxes. Taxpayers can claim the credit for 2008 purchases by filing the new Form 5405 with their 2008 tax returns. The home must be the taxpayer's main residence, must be located in the United States, and the D.C. first-time home buyer credit cannot be claimed in the year of the purchase or any prior year. It is important that taxpayers who take advantage of this new credit plan understand that the credit is an interest-free loan that must be paid back over 15 years in 15 equal installment payments beginning the second year after the credit is claimed.

About Liberty Tax Service

Liberty Tax Service is the fastest growing retail tax preparation company in the industry's history, with over 3,000 offices in the United States and Canada. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 6,000,000 individual income tax returns. With 40 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service (NYSE:JTX).

Liberty Tax Service provides computerized income tax preparation, electronic filing, refund loans, and online filing through eSmart Tax at www.esmarttax.com. Each office offers customers audit assistance, a money back guarantee, and free tax return checking. The Liberty Tax Service franchise opportunity has climbed to #3 on the latest Entrepreneur "Franchise 500."

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