There were a huge number of changes to the 2008 tax laws is both the Housing Bill and the Bailout Bill.  The impact of a lot of them are just coming to light as clients start putting their information together for their 2008 taxes.  Here are the highlights of what I am seeing:

 

1. In WA we can still take a deduction for Sales Tax if we itemize our deductions.  In addition to the standard sales tax deduction based on your Adjusted Gross Income, you can deduct sales tax paid on Home Construction or major remodels and the purchase of new vehicles, boats, airplanes or other major purchases.

 

2. Those who do not itemize can, for the first time every, deduct a limited amount of the real estate taxes paid on their primary residence on the front page of their 1040.  It is limited to $1000 for Married Filing Joint and $500 for Single filers.

 

3. The first time Homebuyer (i.e. someone who has not owned a home for 3 years) is equal to $7500 or 10% of the purchase price whichever is less.  This is a direct tax credit, but MUST BE PAID BACK.  So, make sure you are aware of how this will affect you long term.

 

4. Businesses can elect to take "Bonus Depreciation" on NEW business depreciable personal property of up to 50% of the purchase price limited to $1 million.  Inventory is not included in this type of property.

 

In addition to the above, the Economic Stabilization Act of 2008 extended the Mortgage Forgiveness of Debt Relief through 2012.  This is a complicated section and each Taxpayer needs to review this with their Tax Preparer to see the tax implications of debt relief from any of their debt including credit cards.  The credit card debt forgiveness is almost always taxable, but some or all of mortgage forgiveness can be non-taxable.