Diversified Accounting & Tax, LLC.

For 2008, you generally can claim a recovery rebate credit of up to $600 ($1,200 if married filing jointly). Generally, the credit cannot be more than your 2008 net income tax liability (your regular tax liability plus any a lternative minimum tax (AMT), minus any nonrefundable credits you claimed other than the child tax credit). However, your credit will be at least $300 ($600 if married filing jointly) if you meet either of the following two conditions:

The total of your earned income, social security benefits (including social security disability payments), tier 1 railroad retirement benefits, certain veterans benefits, and nontaxable combat pay you elect to include in earned income is at least $3,000, or

Your total income (Form 1040, line 22; Form 1040A, line 15; or Form 1040EZ, line 4) is more than $8,950 if your filing status is single or married filing separately ($11,500 if head of household; $14,400 if qualifying widow(er); $17,900 if married filing jointly), and your net income tax liability is more than zero.

If you meet either of these conditions, you can also get an additional $300 for each of your children who is a qualifying child for the child tax credit.
To be eligible, you and your spouse each must have a valid social security number. To get the additional $300 credit for a child, the child must have a valid social security number. However, a valid social security number is not required for you, your spouse, or any qualifying child(ren) if you file a joint return and either you or your spouse was a member of the U.S. Armed Forces at any time during 2008.
You are not eligible for the credit if you can be claimed as a dependent of another taxpayer, or if you file Form 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS.
If your 2008 AGI is more than $75,000 ($150,000 if married filing jointly), your credit will be reduced by 5% of your AGI in excess of that amount.
Credit reduced or eliminated by economic stimulus payment.
Your credit is reduced by any economic stimulus payment you received in 2008. However, if your credit is less than the stimulus payment you received, you do not have to repay the difference.

2008 Changes
The amount you can deduct for each exemption has increased to $3,500 for 2008.
You lose part of the benefit of your exemptions if your AGI is above a certain amount. The amount at which the phase-out begins depends on your filing status. For 2008, the phase-out begins at:

$119,975 for married persons filing separately,

$159,950 for single individuals,

$199,950 for heads of household, and

$239,950 for married persons filing jointly or qualifying widow(er)s.

Beginning in 2008, you can lose no more than 1/3 of the dollar amount of your exemptions. In other words, each exemption cannot be reduced to less than $2,333.

If your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. In 2008, this amount is increased to $159,950 ($79,975 if married filing separately). Beginning in 2008, the amount by which these itemized deductions are reduced is only of the amount of the reduction that otherwise would have applied.
Penalty for Failure to File Income Tax Return Increased
If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is increased. In this situation, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
Penalty for Frivolous Tax Submissions Increased

The IRS has published a list of positions that are identified as frivolous. The penalty for filing a frivolous tax return is $5,000. A frivolous return is one that does not includ e enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. You will have to pay the penalty if you filed this kind of return because of a frivolous position on your part or a desire to delay or interfere with the administration of federal income tax laws. Also, the $5,000 penalty applies to other specified frivolous submissions. For more information and a list of positions identified as frivolous, see Notice 2008-14, 2008-4 I.R.B. 310.

Exclusion from Income for Certain Cancellation of Debt on Principal Residence
The Mortgage Forgiveness Debt Relief Act of 2007 allows individuals to exclude from gross income a discharge of qualified principal residence indebtedness.

Exclusion on Sale of Main Home by Surviving Spouse
For sales after 2007, the maximum exclusion on the sale of a main home by an unmarried surviving spouse is $500 ,000 if the sale occurs no later than 2 years after the date of the other spouse’s death. However, this rule applies only if the requirements for joint filers relating to ownership and use were met immediately before the date of such death, and during the 2-year period ending on the date of such death, there was no sale or exchange of a main home by either spouse which qualified for the exclusion.

Education Savings Bond Exclusion
Modified adjusted gross income phase-out amounts have increased for 2008.

Hope and Lifetime Learning Credits
The amount of the education credits and the income phase-out limits have increased for 2008.

New Form 8917, Tuition and Fees Deduction
To claim the tuition and fees deduction, you must complete Form 8917, Tuition and Fees Deduction, and file it with Form 1040 or Form 1040A.

Student Loan Interest Deduction
For 2008, the modified adjusted gross income phase-out amounts have increased.

The maximum amount of the credit has increased. The most you can get is:

$2,917 if you have one qualifying child,

$4,824 if you have more than one qualifying child, or

$438 if you do not have a qualifying child.
The maximum amount of income you can earn and still get the credit has increased for 2008. You may be able to take the credit if:

You have more than one qualifying child and you earn less than $38,646 ($41,646 if married filing jointly),

You have one qualifying child and you earn less than $33,995 ($36,995 if married filing jointly), or

You do not have a qualifying child and you earn less than $12,880 ($15,880 if married filing jointly).
The maximum amount of AGI you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.
Investment income amount increased
The maximum amount of investment income you can have and still get the credit has increased to $2,950 for 2008.
Advance payment of the credit
If20you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2008 can be as much as $1,750.
Nontaxable combat pay election
You can elect to include your nontaxable combat pay in earned income when you figure your earned income credit for 2008. This election was due to expire at the end of 2007 but has been extended to years after 2007.

Adoption Benefits Increased
For 2008, the maximum adoption credit and maximum exclusion from income under your e mployer’s adoption assistance program have increased.

Child’s Investment Income
For 2008, new rules apply for children between the ages of 18 and 23 with investment income.

Earned Income for Additional Child Tax Credit
The minimum earned income amount has increased for 2008.