Tax Law Changes for 2008 - What to Expect When You’re Filing Next Year
There are a number of important tax law changes that take effect this year, including three changes that will affect some homeowners. There are also changes that impact business owners.
While you won’t see the impact of these changes until you file your returns early in 2009, it helps to know about them now so you can keep proper records and make the smartest decisions for your money.
Take a few minutes to review the changes so you can keep them in mind as you devise your 2008 tax strategies.
Changes for Homeowners
Homeowner’s Exemption: In the past, taxpayers have taken the opportunity to convert a rental property or vacation home into their primary residence and then later sell the property. This allowed them to take advantage of the Homeowner’s Exemption which allows a taxpayer to exclude up to $250K ($500K for married couples) of gain realized on the sale of a primary residence. An example of a common strategy has been:
- Taxpayer acquires rental property in 2000 for $100K.
- Taxpayer rents the property out for three years.
- In 2003, taxpayer moves into the property as his/her primary residence.
- In 2005, taxpayer sells the property for $600K.
- Taxpayer (married couple) avoids paying taxes on the entire gain ($500K).
