Losses suffered as a result of a number of federally declared disasters in the Midwest last summer qualify for special treatment on 2008 tax returns.
The Heartland Disaster Tax Relief Act of 2008 provides certain tax breaks to help victims of the severe storms, flooding and tornadoes that occurred in Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Missouri, Minnesota, Nebraska and Wisconsin from May 20 through July 31, 2008. It also provides tax breaks for people who helped them.
Removal of loss limitations: Ordinarily, to figure a deduction for a casualty or theft loss of personal property, taxpayers who itemize must reduce the loss by $100 and also reduce their total casualty and theft losses by 10% of their adjusted gross income. Only the excess over these $100 and 10% limits is deductible. The Heartland Relief Act removes these limits for the affected disaster areas so that the entire amount of the unreimbursed losses is deductible if the taxpayer itemizes.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Cancellation of debt: Taxpayers whose principal home is located in the disaster area can exclude from taxable income any non-business debt, such as a mortgage, that is canceled by the lender through 2009.
Education credits: The new law expands the Hope and Lifetime Learning education credits for students attending college in the Midwestern disaster area. The Hope Credit is expanded to 100% of the first $2,400 in eligible expenses plus 50% of the next $2,400, effectively doubling the maximum Hope Credit from $1,800 to $3,600 for each eligible student. The Lifetime Learning Credit is increased from 20% to 40% of the first $10,000 in eligible expenses, doubling the maximum credit from $2,000 to $4,000 per tax return
Retirement funds: Taxpayers in the Midwestern Disaster area can borrow up to $100,000 from their employer-based retirement plans, double the usual limit of $50,000. And they can take up to $100,000 of early distributions from their retirement funds penalty free. Although they will still owe income taxes on the distribution, they can spread the tax payment over three years.
Charitable giving: Taxpayers who house individuals displaced by the severe storms, tornadoes or floods may be able to claim an additional personal exemption amount of $500 per displaced individual in 2008 or 2009, up to a maximum of $2,000. Those who used their personal vehicles to provide charitable services in the aftermath of the disasters qualify for a special mileage allowance. They can deduct 36 cents per mile for the period of May 2 through June 30 and 41 cents per mile from July 1 December 31, 2008.
-
Stock Market Today: Stocks Are Mixed Before Liberation DayMarkets look forward to what comes with the reordering of 80-year-old global trade relationships.
-
Stagflation: What It Is and Why Retirees Should CareStagflation — the economic bogeyman of the 1970's — may return to the US. Here's what it could mean to your retirement.
-
New South Carolina Income Tax Cut Might Eat Your CashState Taxes South Carolina’s flat income tax bill could have the majority of residents paying higher income taxes. Find out how.
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social SecurityTreasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
-
IRS Layoffs Spark Delays, Doubt This Tax SeasonTax Season Tax experts say Trump’s downsizing of the IRS is already causing problems.
-
States with the Highest Income Tax Rates for RetireesState Tax You may reconsider living and retiring in one of these states due to high taxes.
-
AI Tax Scams Target Middle and Older Adults: What to KnowScams Whether you’re a retiree or Gen Z, scammers can gouge big financial losses with the help of artificial intelligence.
-
Tax-Deductible Home Improvements for Retirement in 2025Retirement Taxes Your aging-in-place plan could benefit from the medical expense tax deduction. But watch out for capital gains and property taxes.
-
Don’t Make These Five Mistakes on Your Tax ReturnTax Filing The IRS warns taxpayers to watch out for these common errors as they prepare to file.
-
You Don’t Want to Retire in Portugal: Here Are Three Tax Reasons WhyRetirement Taxes With the NHR benefit retiring and pension taxes increasing, you might rethink your retirement plans in Portugal.
