Tax Update 2009

January, 2009

Tax Update Key Exemptions and Deductions Personal Exemptions: Personal Exemption for each qualifying dependent increased by $100 for 2008 to $3,500.

Woods Tax & Accounting Service Miriam Woods 707 Cherry St., Charlotte, MI 48813 Website: www.woodstaxservice.com Email: [email protected] Phone: 517-543-5629 or 517-231-1634 cell

Standard Deductions: The new standard deductions for those who do NOT itemize are as follows:

What’s New for 2008 tax year?

Married Filing Joint $10,900

Recovery Rebate Credit

Head of Household $8,000

The 2008 Economic Stimulus Act of 2008 contained provisions for stimulus checks to be mailed out beginning in May, 2008. If you did not qualify or did not receive the maximum amount for your stimulus payment you may be entitled to a recovery rebate credit when you file your 2008 tax return. Bring the amount of payment you received in 2008 which can be found on your Economic Stimulus Payment Notice or by going to IRS.gov and clicking on How Much Was My 2008 Stimulus Payment.

Single

$5,450

Standard Mileage Rates The standard mileage rates for 2008 and 2009 are: Jan-July Aug-Dec 2009 2008 2008 Business

$.505 $.585

$.55

Charitable Work $.14

$.14

$.14

Medical/Moving $.19

$.27

$.24

FirstFirst-Time Homebuyers Tax Credit First-time homebuyers should begin planning now to take advantage of a new tax credit available for a limited time. The credit applies to primary home purchases between April 9, 2008, and June 30, 2009. Normally, this tax credit must be paid back in equal payments over 15 years. The credit is 10 percent of the purchase price of the home, with a maximum available refundable tax credit of $7,500 for either a single taxpayer or a married couple filing jointly. First-time homebuyers are those who have not owned a home in the three years prior to a purchase.

Social Security Earning Limits

Real Estate Tax Deduction

The maximum amount of income subject to social security tax is $106,800.

If you pay real estate taxes but are not able to itemize your deductions, there is an additional standard deduction for 2008 and 2009. The amount is equal to the amount of real estate taxes paid up to $500 for single filers and $1000 for joint filers.

Individuals under 65 can earn up to $14,160 without losing benefits. Individuals who turn 65 in 2009 can earn up to $37,680

Earned Income Credit Amounts The maximum amount of earned income and qualify for the credit is

Energy Tax Credit Up to a $500 credit is available for tax years 2009 to 2016 (NOT 2008) for the installation of energy efficient improvements made to your main home. This is the same credit that was available for 2006 & 2007. Items that are eligible include installation systems that reduce heat loss/gain, exterior windows, exterior doors, metal roofs, main air circulating fan, furnace, solar panels, solar water heating equipment or a fuel cell power plant.

$38,646 with two children ($41,646 if married filing joint)

Charitable Contributions

$33,995 with one child ($36,995 if Married filing joint)

To deduct any charitable donation of money, you must have a bank record, credit card statement or a written communication from the recipient showing the name of the organization and the date and amount of the contribution.

$12,880 with no children ($15,880 if Married filing joint)

(Continued on page 2)

Page 2

Mortgage Forgiveness Debt Relief Act of 2007 Following a foreclosure where the home sells for less than the borrower’s outstanding mortgage, the lender forgives all or part of the unpaid mortgage debt. Normally that cancelled debt would be considered income by IRS. However this new law will now exclude the “income” from the forgiveness of debt if it is secured by a principal residence. This special relief is available for six years beginning Jan. 1, 2007 through 2012.

College Tuition & Expenses Up to $4000 in Tuition & fees can be deducted on the front of the 1040. The Hope Credit and Lifetime Learning Credit are still available. The Hope Credit can be up to $1500 and the Lifetime Learning credit is 20% of qualified tuition up to $2000.

Reduced Capital Gain Rates Capital Gains and dividend income are taxed at a maximum rate of 15% through 2010. Taxpayers in the 10% and 15% tax brackets will be taxed for capital gains at a 0 (zero)% rate for tax years 2008, 2009 and 2010.

Tax Update

Checklist of what to bring to your tax appointment □ All W-2 forms □ Social Security numbers and birthdays for taxpayer, spouse & children □ Amount of interest, dividends and capital gains received (income or losses) □ Amount of state & local refunds received last year □ All income and expenses related to your business □ Auto mileage for business or rental properties— total mileage & business miles on vehicle □ All 1099 forms received confirming income from retirement, disability, gambling winnings □ Amount of Unemployment Compensation received □ Amount Social Security Benefits received □ Amount of rental property income and expenses □ Amount of IRA contributions □ Amount of Student Loan interest paid □ Amount paid for child care including provider's SS# or Fed. ID# and address. □ Amount of higher education expenses (tuition & fees) paid in 2008 □ Amount of health insurance premiums paid □ Real estate property tax bills showing amount assessed & paid for your property in 2008 □ Amount of Michigan Sales Tax paid in 2008 if you purchased a car, boat or motorcycle □ 2008 Taxable value of your home (for MI Homestead Credit) □ Amount paid for auto license fees (autos, trailers, boats, etc) □ Year-end statement of mortgage interest (Form 1098) and escrow activity on mortgage □ Charitable contributions (cash, non-cash gifts, mileage) □ Sale of Home in 2008 - closing papers when bought & sold □ Amount of job related expenses & union dues □ Amount of 2008 Estimated Tax Payments (Federal & State) □ Amount of purchases bought on Internet/ catalog (for MI Sales Tax) □ Amount of rent paid in 2008, name and address of landowner □ 2007 income tax return (unless prepared by Woods Tax Service) □ Direct Deposit information: bank account no. & routing no.

2008 Tax Rates The following shows the 2008 income brackets for each tax rate.

All returns will be electronicallyelectronically-filed FREE!

Tax Rate

Single

Married Filing Joint

Head of Household

10%

$1—$8,025

$1—$16,050

$1—$11,450

15%

$8,026—$32,550

$16,051-$65,100

$11,451-$43,650

25%

$35,551-$78,850

$65,101-$131,450

$43,651-$112,650

28%

$78,851-$164,550

$131,451-$200,300

$112,651-$182,400

33%

$164,551-$357,700

$200,301-$357,700

$182,421-$357,700

35%

over $357,701

over $357,701

over $357,701