Make the Most of New Tax Incentives with Year-End Planning

The end of the year has historically been the time for tax planning and making strategic year-end adjustments to reduce your tax bite.  2008 adds a whole new meaning to year-end tax planning.  Because of the downturn in the economy, falling home prices, failing financial institutions and the huge losses on Wall Street, Congress has provided a number of tax incentives in an effort to get the economy back on track.   The following articles include details about the most significant changes and those that require action by year's end.
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Acquiring a New Business Vehicle? Maximize Your Deductions!

If, in 2008, you purchased and placed in service an automobile used in your business, you have two choices for deducting expenses related to the vehicle: (1) use a standard mileage rate (50.5 cents for each business mile driven in the first half of 2008 and 58.5 cents for each business mile driven in the last half of 2008), or (2) deduct actual expenses, including depreciation.  The standard mileage deduction is relatively easy to compute. Simply multiply the number of miles the vehicle was driven for business for each half of the year by the appropriate mileage rate for that period.
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Tax Breaks for the Self-Employed and Small Business Owners

The following is a compilation of a number of tax breaks available to self-employed individuals and/or small business owners.  Some can be implemented before year’s end, providing benefits for your 2008 return, while others will provide planning opportunities for 2009.
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Two Special Business Provisions for 2008

This is a reminder that the Economic Stimulus Package that passed earlier this year includes two major tax benefits for small to medium businesses that provide the opportunity to acquire business assets and write off all or a substantial portion of the cost in the first year.  As the end of the year approaches, you may wish to consider these two benefits as a means of reducing current-year profits while expanding your business capabilities.
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Alternative Minimum Tax (AMT) Patched Again!

For yet another year, Congress has applied a patch to the AMT by increasing the AMT exemption amount and continuing to allow nonrefundable credits, such as dependent care, child credit, education credits and others that most middle-income taxpayers use to avoid this punitive tax.  In addition, the amount of long-term unused AMT tax credit that can be applied in the current year was also substantially increased.
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Home Energy Credits Enhanced

As part of the recently enacted Economic Stabilization legislation, homeowners can continue to benefit from a tax credit for installing energy-generating systems into their homes.  The new law removed limitations and added wind and geothermal generating systems.  If you are thinking of going green, here is an overview of these credits.
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Optional Medical Procedures

Deductible medical expenses are defined as the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body including dental expenses.
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Split Rate Mileage Recordkeeping

By now, most of us are probably aware that the business mileage rate for 2008 is 50.5 cents per mile for the first half of the year and 58.5 cents for the last half of the year.  The question that comes to mind is whether a taxpayer can simply use the average of 54.5 cents per mile for the whole year.
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Income Averaging for Exxon Valdez Litigation Amounts

Effective October 3, 2008, commercial fishermen and other individuals whose livelihoods were negatively impacted by the '89 Exxon Valdez oil spill are allowed to average any settlement or judgment-related income that they receive in connection with pending litigation in the federal courts over three years for federal tax purposes. It also allows them to use these funds to make contributions to retirement accounts. 

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Home Equity Debt Interest Deduction Limitations

One of the current IRS audit initiatives is checking to see if taxpayers are deducting too much equity debt interest.  Generally, taxpayers are allowed to deduct the interest on up to one million dollars of acquisition debt and the interest on up to $100,000 of equity debt.  Over the past few years, taxpayers have frequently exceeded the debt limits and have failed to adjust their interest deduction accordingly.
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Year-End Tax Strategies for Stock Investors

The volatile securities markets make year-end planning for investors especially challenging this year.  As December 31 approaches, the following moves should be considered to make the best tax use of both paper and actual losses from stock market investments.
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Tax Credit to Aid First-Time Homebuyers

First-time homebuyers may wish to take advantage of a new tax credit included in the Housing and Economic Recovery Act of 2008.
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Tax-Free IRA to Charity Distributions Reinstated

The provision that permits taxpayers age 70½ and over to make direct distributions (up to $100,000) from their IRA account to a charity has been reinstated for 2008 and 2009.  The distribution is tax-free, but there is no charitable deduction.  This provision can be very beneficial to taxpayers who have social security income and/or do not itemize their deductions.
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Year-End Tax Tips and Planning Strategies

The end of the year is traditionally a time to celebrate the holidays, and your 2008 taxes may be the farthest thing from your mind.  However, with a few exceptions, it is your last opportunity to alter the results of your 2008 taxes.  The following are some of the many possible strategies that can be employed before year’s end.
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Economic Stabilization Legislation

On October 3, 2008, Congress passed and the President signed into law the “Economic Stabilization” legislation, which included numerous tax law changes that are mostly pro-taxpayer. These changes will impact just about everyone, and you are encouraged to review them below. Please call this office if you have questions about any of the provisions or need additional details.
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First Look: QuickBooks 2009

QuickBooks 2009 has just been released and you’ll find a number of improvements that are sure to be helpful. Of course, the introduction of a new release also means the discontinuation of support for an old release—QuickBooks will end support for QuickBooks 2006 as of May 31, 2009. This means that after that date you’ll no longer able to request technical assistance from Intuit, and services such as payroll, merchant service, online banking, and so on will no longer be accessible. With that background in mind, let’s explore what’s new!
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