Friday focus: Personal finance
The recession is rolling over onto 2008 income tax returns. So if you suffered some sort of financial setback, like many people did, here’s help:
•What if you received jobless benefits in 2008?
Unemployment benefits and severance pay are taxable. Your employer will include severance pay in your Form W-2 and that’s true for accumulated sick and vacation time, too.
State jobless insurance benefits would be reported on a 1099-G. If taxes were withheld, that would show up on the 1099-G.
For 2009, up to $2,400 of unemployment benefits are not taxable, thanks to the American Recovery and Reinvestment Act. This tax break, though, will not apply on your 2008 income tax return.
•What if you sold stock at a loss?
You can deduct up to $3,000 per year of net capital losses – that’s your capital gains less your capital losses – against ordinary income.
Any net capital loss exceeding the $3,000 limit can be carried over indefinitely to offset future capital gains and/or future ordinary income. However, under the wash sale rules, a loss is not deductible if you repurchase identical shares within 30 days before or after selling it.
Or if you had a $10,000 capital gain on the sale of stock in 2008 and a $10,000 capital loss on the sale of another stock in 2008, you could deduct all those losses to offset gains for 2008.
If the money-losing stock was held in a 401(k) or an IRA, you would not be able to deduct the losses.
•What if you made less in 2008?
You may qualify for more tax breaks and deductions. You can claim miscellaneous itemized deductions on Schedule A, for example, only if combined miscellaneous expenses exceed 2 percent of your adjusted gross income. You’d claim the amount of expenses that is more than that 2 percent threshold. Some job-search expenses could apply.
Look into the Earned Income Tax Credit for working families and individuals. For the 2008 tax year, the maximum for the federal earned-income tax credit is $4,824 for a family with two or more qualifying children.
Different income limits apply based on family size. Generally, the earned-income tax credit and adjusted gross income must be less than $38,646 – or $41,646 if married and filing jointly – for a family with two or more qualifying children.
Detroit Free Press