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The Emergency Economic Stabilization Act
of 2008, the “bailout law,” extends a variety of tax breaks that had
expired after 2007. Generally, the extensions continue through 2009.
Here’s how you can take advantage of the tax goodies under the tree this
year.
1. Pay
next semester’s tuition.
The
bailout law restores the above-the-line deduction for qualified higher
education expenses. The maximum deduction is $4,000 for joint filers
with an AGI of $130,000 or less ($65,000 for single filers). But the
deduction is cut in half to $2,000 for higher-income taxpayers until it
disappears completely for an AGI above $160,000 ($80,000 for single
filers).
Typically, the next tuition bill for a child in college is due next
month.
Tip: Make the payment before Jan. 1. Then you can claim the
tuition deduction on your ’08 tax return.
This may
be worthwhile if you prepaid the tuition due in January 2008 in December
2007. Reason: You can still realize the tax benefits from paying for two
semesters in this year.
2. Buy a
‘big-ticket’ item.
The new
law reinstates the optional deduction for state and local sales taxes.
How it
works: Instead of deducting state and local income taxes, you can
elect to deduct the state and local sales taxes you paid this year. But
it usually takes a lot of work to total up the sales taxes on all of
your family’s purchases. Alternatively, you can base
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