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Tax Tip - July 28th, 2008

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Are you keeping up with tax law changes?

Congress has passed at least one major tax law each year since 2001. Have you been keeping up?

Here are five questions to test your knowledge:

1. The Tax Increase Prevention Act of 2007 raised the alternative minimum tax (AMT) exemption for 2007 to $66,250 for joint filers ($44,350 for singles). What is the AMT exemption for 2008?

Answer: The increase applied only to 2007. The AMT exemption returned to pre-Act amounts for 2008 ($45,000 for couples and $33,750 for singles).

2. The Economic Growth and Tax Relief Reconciliation Act of 2001 increased the estate tax exclusion and reduced the estate tax rate. In 2008, you can transfer up to $2 million tax-free to your heirs. The maximum estate tax rate is currently 45%, but is scheduled to fall to zero in 2010. True or false?

Answer: True. The Act eliminated the estate tax for the year 2010. In 2011, the estate tax exclusion and tax rate are reinstated, with both returning to pre-2001 amounts.

3. The Jobs and Growth Tax Relief Reconciliation Act of 2003 increased the Section 179 depreciation expensing maximum to $100,000. What's the maximum for tax year 2008?

Answer: The 2008 Economic Stimulus Act raised the maximum Section 179 deduction for most eligible equipment to $250,000 for 2008.

4. The Tax Relief and Health Care Act of 2006 extended three expiring deductions: sales tax, school related expenses of teachers, and qualified tuition and related expenses. Will these deductions be available for 2008?

Answer: Under present law, the deductions expired December 31, 2007, and are not available in 2008.

5. The Tax Increase Prevention and Reconciliation Act of 2005 extended the 0% capital gains and dividends tax rate for taxpayers in the 10% or 15% bracket through what year?

Answer: The zero tax rate expires at the end of 2010.

If you have questions about these changes or others, please contact us.
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