What's New?
Key developments include the following:
- Individuals who purchase their "first" home before July 1, 2009, may be entitled to a tax credit.
- Gain on the sale of a principal residence that the owner previously used as a vacation home or rental property could be taxable, even if the tax law's capital gain exclusion otherwise applies to the sale.
- State and local real property taxes of up to $500 ($1,000 for married individuals filing jointly) are deductible as an additional standard deduction in 2008 and 2009.
- Taxpayers who itemize their deductions again have the option of deducting state and local general sales taxes instead of state and local income taxes on their 2008 and 2009 returns.
- Two education-related deductions — one for the payment of higher education expenses and another for classroom-related expenses incurred by eligible K-12 educators — have been extended through 2009. (Limits apply.)
- Also extended for 2008 and 2009 is a provision allowing taxpayers who have reached age 70½ to roll over money in individual retirement accounts (IRAs) to qualified charities on a tax-free basis. As much as $100,000 may be donated annually.
- Estates of up to $3.5 million may avoid federal estate tax in 2009. The estate tax is repealed for 2010 and returns in 2011 with a $1 million effective exemption.