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taxmap/instr/i1040gi-001.htm#TXMP5d71c581 What's New for 2008(p5)

taxmap/instr/i1040gi-001.htm#TXMP24522454 IRA deduction expanded.(p5)

You and your spouse, if filing jointly, each may be able to deduct up to $5,000 ($6,000 if age 50 or older at the end of the year). You may be able to take an IRA deduction if you were covered by a retirement plan and your 2008 modified AGI is less than $63,000 ($105,000 if married filing jointly or qualifying widow(er)).

You may be able to deduct up to an additional $3,000 if you were a participant in a 401(k) plan and your employer was in bankruptcy in an earlier year. See the instructions for line 32 on page 27.

taxmap/instr/i1040gi-001.htm#TXMP225a048c Earned income credit (EIC).(p5)

You may be able to take the EIC if:

• A child lived with you and you earned less than $38,646 ($41,646 if married filing jointly), or
• A child did not live with you and you earned less than $12,880 ($15,880 if married filing jointly).

The maximum AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you. The maximum investment income you can have and still get the credit has increased to $2,950.

taxmap/instr/i1040gi-001.htm#TXMP7e54e75d Personal exemption and itemized deduction phaseouts reduced.(p5)

Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions and itemized deductions. The amount by which these deductions are reduced in 2008 will be only of the amount of the reduction that otherwise would have applied in 2007.

taxmap/instr/i1040gi-001.htm#TXMP79955d56 Capital gain tax rate reduced.(p5)

The 5% capital gain tax rate is reduced to zero.

taxmap/instr/i1040gi-001.htm#TXMP03bbc899 Tax on children's income.(p5)

Form 8615 will be required to figure the tax for the following children with investment income of more than $1,800.

1. Children under age 18 at the end of 2008.
2. The following children if their earned income is not more than half their support.
   1. Children age 18 at the end of 2008.
   2. Children over age 18 and under age 24 at the end of 2008 who are full-time students.

The election to report a child's investment income on a parent's return and the special rule for when a child must file Form 6251 will also apply to the children listed above.

taxmap/instr/i1040gi-001.htm#TXMP3d5e926b Expiring tax benefits.(p5)

The following benefits are scheduled to expire and will not apply for 2008.

• Deduction for educator expenses in figuring adjusted gross income.
• Tuition and fees deduction.
• The exclusion from income of qualified charitable distributions.
• Credit for nonbusiness energy property.
• District of Columbia first-time homebuyer credit (for homes purchased after 2007).
• The election to include nontaxable combat pay in earned income for the EIC.

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