Changes to tax law that might affect you

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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 home buyer 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

 
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