Happy Holidays
Hi, I am Tynisa Gaines, the owner of Tynisa Gaines, EA LLC. 2008 has been an interesting year for everyone, especially tax professionals. I have listed the latest and greatest tax law changes below.
Individual Tax Returns
If you normally file a 1040, 1040A, or 1040X the following tax changes may apply to you:
Do you need another reason to contribute to your 201K? (Smile, it will get better.)
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. The following tax brackets may be eligible for an additional credit up to $2000 on their tax return.
Married couples filing jointly with incomes up to $53,000, Head of Household with income $39,750, and Single or Married Filing Separate incomes up to $26,500. You have until April 15, 2009 to add to or set-up and IRA if your income falls within these brackets.
Did you purchase a home this year? Do you plan to purchase one in 2009? Have you already paid your mortgage off? Did you foreclose on your house?
If you purchased a home after 2006 and pay mortgage insurance premiums or PMI, they remain deductible through 2010.
If you plan to purchase a home for the first time (or have not owned in 3 years), there is a credit of $7,500 available that must be paid back over 15 years via your tax return; if you purchase between April 9, 2008 and June 30, 2009. More information on this credit was published in the October issue.
If you own your home free and clear and just pay property taxes, there is a new law for you! Effective this year, there is an additional standard deduction for those who do not itemize. The deduction is for real estate taxes paid, and singles can deduct up to $500 and joint filers up to $1000.
If you sold your home for less than you owed, restructured your mortgage, or foreclosed through 2009. Your canceled mortgage debt generally won’t be treated as taxable income through 2012.
Did you donate to charity?
Did you get a receipt? Taxpayers must show documentation for all monetary contributions. A cancelled check, bank record, or receipt from the organization. You must be able to prove the name of the organization, the date and the amount. For non-monetary donations, they must be in good condition.
Did you not receive all or part your stimulus check this year?
You may be entitled to a recovery rebate credit when you file your 2008 tax return.
Lastly, the following items have been extended for 2008:
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Tuition Deduction
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Teacher deduction
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State & local sales tax deduction
IRS has changed Regulations regarding claiming children of Divorced or Separated parents on a tax return. New Regulation 1.152-4 states the child is “the qualifying child of the parent with whom the child resides for a longer period of time during the taxable year.” It further states that it is referring to nights not days, and if they are equal then the parent with the higher adjusted gross income is considered the custodial parent. The custodial parent can still release the child to the non-custodial parent by filing for 8332 which must be attached to the return for the year(s) that the non-custodial parent claims the child.
Beginning Jan. 1, 2009, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
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55 cents per mile for business miles driven;
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24 cents per mile driven for medical or moving purposes; and
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14 cents per mile driven in service of charitable organizations.
There have been changes to the AMT, Kiddie Tax, HSA’s, and IRA’s. If you have a specific question about any of these, let me know.
SELF EMPLOYMENT CORNER
Most business owners utilize the Section 179 deduction for depreciating assets. The amount has increased to $250,000 for 2008 which is double the 2007 amount of $125,000.
50% bonus depreciation is back and it’s the default. Taxpayers will need to elect out if they don’t want to utilize it.
Penalties for late filed Partnership returns are $85/month/partner.
A penalty for late filed S-Corp returns is $85/month/shareholder.
If you started a business this year, you can deduct and or amortize startup costs over 15 years without attaching a statement. Under IRC Sec. 195, you can deduct up to $5000 in the year the business starts. If costs exceed $50,000 this limit is reduced dollar for dollar.
Do you have a business related question or need help with your books?
Email me mstyea@yahoo.com.
ASK TY!
Ty, do you have any new tax laws that affect the military?
T. McKoy, Temecula, CA
They have made permanent the option to include excluded combat pay as earned income for the purposes of Earned Income Tax Credit or EITC.
That’s all for now. Thanks for reading! If there is a particular tax subject you’d like to see in the next issue, let me know!
Do you have a tax question? Email me at mstyea@yahoo.com