TAX CHANGES 2008

Earned Income Credit
The maximum amount of income you can earn and still get the credit has increased. You may be able to take the credit if:

• You have more than one qualifying child and your earned income was less than $37,783 ($39,783 if married filing jointly).
• You have one qualifying child and your earned income was less than $33,241($35,241 if married filing jointly), or
• You do not have a qualifying child and your earned income was less than $12,590 ($14,590 if married filing jointly).

Investment income amount has increased.  The maximum amount of investment income you can have and still get the credit has increased to $2,900.

You can choose to include combat pay in your earned income for purposes of computing this credit.

Standard Mileage Rates Increase

The standard mileage rate for operating your car for business use in 2007 increased to 48.5 cents per mile.  Beginning January 1, 2008 the rate will be 50.5 cents per mile.

The standard mileage rate for operating your car for medical/moving use in 2007 increased to 20 cents per mile.

The standard mileage rate for operating your car for charitable use in 2007 remained at 14 cents per mile.

Qualifying Child (Uniform Definition)
In an attempt to simplify the requirements for dependents, the IRS has established the uniform definition of a qualifying child (See Earned Income Tax Credit in the Resources & Links section of our website). Those guidelines will be used for all the following tax benefits:

• Dependency exemption
• Head of household filing status
• Earned income tax credit (EITC)
• Child tax credit
• Credit for child and dependent care expenses

Be aware that these changes could impact your tax situation if you are eligible for any of these credits.

Energy Tax Incentives
A lifetime maximum non refundable credit of $500 per tax payer will be available in 2006 and 2007 for costs incurred to improve the energy efficiency of the taxpayer's main home. These credits pertain to the costs of specific heating and cooling equipment, windows, and air conditioners

Domestic Production Deduction
A deduction for income attributable to domestic production activities is available to individuals, corporations and pass-through entities.  This deduction will be of special interest to many of our clients, since the list of qualified production activities, include manufacturing, producing and growing. You can deduct 6% of the lesser of your qualified production activities income or your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year.  Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year.