"So, Ken and Daria, What's Up for Tax Year 2008?"

More changes, of course! (some surprisingly good ones.) While you won't realize the benefits from these changes until you file your returns early in 2009, it helps to know about them now so that you can keep proper records and make the smartest decisions for your money.

Here are 10 of the most important tax changes you should know about for 2008:

	To Prepay or Not to Prepay? When it comes to tax implications, ignore the old argument that says you shouldn't prepay loans because you lose the tax deduction on the interest you save. Let's say you don't prepay, and spend $1,000 on interest. Sure, that $1,000 gives you a $280 tax deduction (if you are in the 28% tax bracket)… but you still spent another $720 on interest you could have saved by prepaying!

1. The so-called "kiddie tax": This taxes the investment income of children at the tax rate of their parents. It now applies to both children younger than 19 (that's good; it was 18) and to full-time students under age 24 who do not provide more than 50% of their own support. Both age groups may receive up to $1,800 of investment income in 2008 and pay tax on that amount at their own lower tax rate.

2. Standard Deductions: These increase to: $8,000 for Head of Household; $10,900 for Married filing Joint/Qualified Widower; and $5,450 for Single/Married Filing Separate. The additional amount for blindness and age is $1,050 (married) and $1,350 (single). For dependents claimed on another's return, the standard deduction is the greater of $900 or $300 plus earned income, not to exceed the filing status standard deduction of the dependent.

3. The Earned Income Credit: Phase-out limits have increased for 2008 as well as the available tax credit amounts. The maximum investment income you can have and still receive this credit has increased to $2,950.

4. U.S. Savings Bonds: For taxpayers who receive income from qualified U.S. Savings Bonds used for qualified education expenses, the phase-out income limits have been increased: Married filing jointly or qualifying widow(er): $100,650–$130,650; married filing separately: deduction not allowed; all other filing statuses: $67,100–$82,100.

5. The Adoption Credit: The amount available for special needs adoptions and all other expenses increases to $11,650. The phase-out income limits for this credit are also increased. For 2008, the credit will be phased out for incomes between $174,730 and $214,730.

6. Keogh and SEPs: The maximum contribution to Keogh and SEPs (Simplified Employee Plan) increases to $46,000.

7. IRAs: The phase-out limits for contributions to Traditional and Roth IRAs have increased to $5,000 from $4,000, with an extra $1000 allowed for taxpayers 50 and older. Phase-out levels are married/filing jointly with AGI (adjusted gross income) of $159,000 and $101,000 for single filers.

8. 401(k) Plans: The maximum contribution to a 401(k) plan in 2008 is $15,500 if you are younger than 50; $20,500 if you are 50 or older.

9. Standard mileage rates have increased to 50.5 cents for business miles, decreased to 20 cents for medical and moving miles. Charitable mileage rate remains 14 cents/mile.

10. Earnings and Social Security: The amount of money you may earn before you Social Security benefits are affected has changed:

a. For people attaining NRA or normal retirement age (as defined by the folks at Social Security; click here to find your NRA) in 2008, the annual exempt amount is $36,120. This higher exempt amount applies only to earnings made in months prior to the month of NRA attainment.

b. For people attaining NRA after 2008, the annual exempt amount in 2008 is $13,560.

When earnings exceed exempt amounts, Social Security withholds $1 in benefits for every $2 of earnings in excess of the lower exempt amount. It withholds $1 in benefits for every $3 of earnings in excess of the higher exempt amount.

Here's another tip to keep in mind for 2008: Consider adjusting the number of allowances you claim on your W-4 form. If you typically OWE money every year, a painless adjustment here could make a world of difference. Get the details on how to do it (it's quick and easy) by clicking here.

Then find out what kind of surplus or shortfall you can expect if you DO make those adjustments — you can figure that out quickly with this handy calculator.

Every little bit helps, so be sure to take advantage of every tax break you're allowed. We recommend you discuss these and other upcoming changes, and how they affect YOU, with your tax advisor.

Speaking of tax advice, be sure to ask your tax advisor how you stay clear of audits. In the meantime, we offer up some guidance here…

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