Tax breaks: Pleasant surprises in store
When you file your taxes this year, remember the tax breaks provided by last year's stimulus bill.
With all the “hoopla” surrounding the current economic stimulus package, taxpayers may overlook important changes that came out of last year’s stimulus bill, said Andrea Coombes in Marketwatch.com. “Forgetting about that earlier stimulus, and any of the other major tax changes in 2008, could mean missing out on some much-needed cash when you file your tax return this year.” Notable changes included relief for taxpayers who owed the alternative minimum tax on incentive stock options; an extra property tax deduction for homeowners who claimed the standard deduction; and a zero rate on capital gains and certain dividends for taxpayers in the 10 percent to 15 percent tax brackets. Think you earn too much to qualify for the latter? “Don’t forget those brackets refer to taxable income, not adjusted gross income.”
Changes to your own financial situation also might offer some additional tax relief, said Tara Siegel Bernard in The New York Times. “When your income drops, you’re more likely to qualify for certain tax breaks that phase out if you earn too much money.” If you lost your job, for example, you may be able to deduct costs tied to job hunting or relocating for a new one. Changes to income might also open doors for certain credits, such as the Child Tax Credit and the Saver’s Credit. The latter gives qualified retirement-plan participants a $1,000 credit, in addition to the tax breaks for contributing to those plans in the first place.
Perhaps the biggest perk for taxpayers whose incomes dropped in 2008 is the opportunity to snag a “stimulus rebate” when you file your return, said Tom Herman in The Wall Street Journal. When the government mailed out stimulus checks to some 120 million filers last year, many people missed out because they earned too much in 2007. But, if your income dropped or you had a child in 2008, you might be able to claim that rebate as a credit on your 2008 return. “Millions of people who didn’t get anything, or got less than the full amount, are indeed eligible this year for the recovery rebate credit—if they can figure out how to decipher the rules and claim it.”