Now is the time to strategize for a lower tax bill come April 2009. Three major tax law changes to be in effect this year:
1 Higher IRA contribution limits. IRA contribution limits increase to $5,000 in 2008; the amount increases to $6,000 for those age 50 and older (includes $1,000 catch-up contribution).
2 Change in "kiddie tax." In 2006 a law partially eliminated a tax break on custodial accounts, requiring a child's unearned income above $1,700 to be taxed at the parents' rate until the child turns 18. A 2007 law broadens the cut-off age to include children ages 19 to 23 who are fulltime students if their earned income is not more than half of their support. The inflation-adjusted amount of the child's unearned income to be taxed increases to $1,800 for 2008.
3 Zero capital gains tax. This year, certain taxpayers in the two lower income tax brackets will pay 0% in capital gains taxes on eligible investment sales.* The 0% longterm capital gains tax rate applies to the sale of appreciated investments held for 12 months or longer and is available only to taxpayers in the 10% and 15% income tax brackets during 2008 through 2010. Note the 0% capital gains tax rate does not apply to children under the age of 18, or age 24 if a dependent student.
Please consult a Wings Financial Tax Services advisor for information about your specific situation at (800) 692-2274, ext. 8249.
| * | The 0% long-term capital gains tax rate is effective
in 2008 through 2010 for qualified taxpayers in the
10% and 15% income tax brackets. Unless new
legislation is passed extending it, the long-term
capital gains tax rate will revert to 10% for taxpayers
in the lower tax brackets and 20% for all other
taxpayers in 2011. |
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