Gather your W-2, charitable receipts and investments statements. Tax season is here.
There are a few bright spots for filers, such as a new credit for first-time homebuyers, a bigger standard deduction for certain homeowners and one last chance to claim a tax rebate if you didn't get one last year. Congress also temporarily fixed the alternative minimum tax, preventing more than 20 million taxpayers from a tax that was expected to hit only the wealthy.
Tax-free capital gains: As of 2008, investors in the 10 percent and 15 percent tax brackets have a 0 percent long-term capital gains tax rate.
These are investors with taxable income of up to $32,550 for individuals and $65,100 for joint filers. This zero rate runs through 2010.
"You could have income above that and have gains partially taxed at the zero percent rate," says Bob D. Scharin, senior tax analyst with Thomson Reuters' Tax & Accounting.
Say a couple has taxable income of $70,000. Of that, $55,000 is ordinary income and $15,000 is capital gains. The couple won't have to pay taxes on the first $10,100 of capital gains. The remaining $4,900, which is above the $65,100 income limit, will be taxed at the regular capital gains tax rate, Scharin says.
Sounds good, but there's a drawback. Capital gains is added to adjusted gross income, and when that goes up you could be ineligible for certain deductions or find your Social Security benefits subject to tax, Scharin says. Also, the age of the "kiddie tax" has been raised to prevent parents from transferring securities to children in low tax brackets to sidestep capital gains taxes. Children's unearned income - interest, dividends and capital gains - that exceeds $1,800 will be taxed at the parents' rate. The kiddie tax applies to children through the age of 18, or 23 if they are full-time students.
Last crack at rebate: Last year's stimulus check technically was a 2008 credit. But checks went out based on 2007 tax information to get money quickly into consumer's hands.
The criteria to qualify haven't changed, but your situation might have since 2007. You now might be eligible for a tax rebate if you weren't before, or you could get a bigger one if you didn't receive the maximum last year.
The maximum rebate is $600 for an individual and twice that for joint filers. Parents with young children can get an extra $300 per child. You must have at least $3,000 in income, and the rebate starts phasing out once income tops $75,000 for singles and $150,000 for joint filers. Dependents are unable to claim rebates.
If you had a child or your income fell below the cut-off limits last year, you could receive a rebate now. You will need to file a return to claim the "recovery rebate credit." Include any rebate amount you already received. If you forgot the amount, look it up online at www.irs.gov.
But don't get your hopes up. "According to the IRS, most people have already received everything they are entitled to when they got their rebate," says Jackie Perlman, an analyst for the Tax Institute at H&R Block.
Beefed-up standard deduction: New this tax season: a bigger standard deduction for homeowners who pay state and local real estate taxes but don't file an itemized return.
On top of the standard deduction, you can claim up to $500 of real estate taxes paid if single or up to $1,000 if filing jointly.
"This is most advantageous to someone who has a small or no mortgage," Scharin says.
First-time homebuyer credit: If you bought a house, you could be eligible for a tax credit worth up to $7,500.
"It's meant to encourage you to get into a house and help you handle the first year's expenses," Perlman says.
The credit applies to purchases from April 9 last year through June 30 this year. To qualify, you can't have owned another home in the prior three years and your adjusted income must be under $95,000 if single and $170,000 if filing jointly.