Tax Deductions: Higher Amounts & New Rules for 2008
If you don’t want to pay taxes on your gross income, then you need to know about deductions. These are amounts you’re allowed to subtract (deduct) from your income to reduce your taxable income so you pay lower taxes.
Individuals are allowed to take what’s called a standard deduction without having to keep any receipts or prove any expenses. Your standard deduction is based on your filing status. For 2008, the amounts are:
Single (5450)
Married Filing Separate (5450)
Married Filing Joint (10900)
Qualifying Widow(er) (10900)
Head of Household (8000)
An individual can choose to use itemized deductions instead, as long as she/he has the proper records to prove the deductions. This method would result in a lower tax if the itemized deductions total more than the standard deduction. You can switch methods from year to year, always choosing the option that’s best for you.
New in 2008: It used to be that you had to itemize deductions in order to subtract the personal property taxes that you paid on your home. For 2008, you’re allowed to add $500 ($1000 if married filing joint) in qualifying state and local real estate taxes to your standard deduction.
There is nothing on Form 1040 telling you to do this. There is NOT a separate line where you enter the amount of the taxes. You include it on line 40 and check the box on line 39c telling the IRS that you’ve included them. For further details, see the instructions for Form 1040, page 34.
Got tax questions? Leave me a comment and I’ll do my best to get you an answer.
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