New Tax Rules That Can Help

The financial-rescue plan passed earlier this year includes a few key changes that could help lower your 2008 tax bill.

The new law revived the tuition and fees deduction that had expired at the end of last year. You can deduct up to $4,000 of qualified costs if your adjusted gross income is $65,000 or less ($130,000 for joint returns) or $2,000 if your AGI is $80,000 or less ($160,000 for joint returns). If your income for the year is less than $58,000 (or $116,000 on a joint return), it's generally better to take the Hope or lifetime learning credit instead, which will shave even more money off your tax bill.

People over age 70½ can give up to $100,000 directly from their traditional IRA to a charity and avoid paying income taxes on the money. You don't need to itemize to benefit, but you can't double dip tax breaks and write off the donation.

Taxpayers will continue to have the option to deduct state and local sales taxes instead of state and local income taxes, which can help people in states that don't have an income tax and retirees who don't have much taxable income.