2008 Tax Law Changes (Part 3)
2008 Tax Law Changes, continued
Self-Employed Health Insurance Deduction. Partners and more-than-2% shareholders in an S corporation may be able to claim this deduction when the insurance policy is in the name of the partner or shareholder. You can either pay the premiums yourself or the partnership or S-Corporation can pay them. However, if you pay the premiums yourself, you must be reimbursed by the partnership or S-Corporation to claim the deduction. Sole-Proprietors should pay the premiums from the business bank account.
Adoption Benefits Increased. For 2008, the maximum adoption credit has increased to $11,650. Also, the maximum exclusion from income for benefits under your employer's adoption assistance program has increased to $11,650. These amounts are phased out if your modified adjusted gross income (MAGI) is between $174,730 and $214,730. You cannot claim the credit or exclusion if your MAGI is $214,730 or more.
Child's Investment Income. The rules regarding the age of a child whose investment income may be taxed at the parent's tax rate will change for 2008. These rules will continue to apply to a child under age 18 at the end of the year but, beginning in 2008, will also apply to a child who is age 18 at the end of the year and whose earned income is not more than half of the child's support, and a student who is under age 24 at the end of the year and whose earned income is not more than half of the child's support.
A student is a child who during any part of 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time, on-farm training course given by a school or a state, county, or local government agency. A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet.
The amount of taxable investment income these children can have without it being subject to tax at the parent's rate has increased to $1,800 for 2008. For 2007, the amount was $1,700.
Continued next week
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