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New Developments in the Tax World
First of all, if you have not received your stimulus check according to the published schedule, you can go to the IRS website and see what the status of that check is with respect to you. Go to www.IRS.gov and then individual taxes and "Where's my stimulus check?"
IRS has issued a directive effective for July 2, 2008 through December 31, 2008 that changes the mileage rate allowed from 50.5 cents per mile to 58.5 cents per mile. Also medical and moving mileage changes from 20 cents per mile to 27 cents per mile. This means that you will have to keep two sets of mileage logs if this applies to you. One for mileage used before July 1st and another for July 1 through the end of the year.
The Economic Stimulus package of 2008 not only provides for the stimulus checks issued to individuals, it provides for a couple of small business tax benefits. The first provision increases the limit for section 179 expensing for qualifying business equipment purchases from $128,000 to $250,000 and it is not reduced until a business has qualifying acquisitions of more than $800,000.
The second provision provides for a special depreciation allowance of 50% for property acquired and placed in service during 2008. This means that a taxpayer is entitled to depreciate 50% of the adjusted basis of the qualified property (after reduction for any section 179 expensing). Then the regular depreciation rate for that property would also be allowed for the remaining adjusted basis. It should be noted that if this additional provision is used, the basis of the property for which it is used will likely need to be reduced for subsequent years.
Also as an aside, this act changes the amounts allowed for depreciation on vehicles used for business as follows:
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Passenger automobiles $10,960 for which the bonus depreciation is allowed - up from a prior limit of $2,960
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Trucks or Vans $11,160 for which the bonus depreciation is allowed - up from a prior limit of $3,160
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The section 179 expense deduction for the over-6000 lb gross vehicle weight vehicles stays at $25,000.
I want to take a quick opportunity to update you on some taxing developments amidst all the recent political hype.
The first thing to know is that there will be a new line on the 1040 to deal with those taxpayers who deserve more of a rebate than they received. There is a complicated 29 line worksheet to figure the right amount. If you received the full amount, this will not affect you in any way. If you didn't receive the full amount, the calculation will need to be completed to determine if you received the right amount based on your 2008 numbers. SOOOO, if you didn't receive the full amount, you will need to have the IRS notice that explains your rebate in order to complete the calculation to see if you are indeed entitled to more.
If you are a reservist or have anyone in your family or friends who is, it is good to know that reservists that need to access their retirement money in an early withdrawal for financial hardship reasons will get a break, if they are called to active duty for at least 180 days or an indefinite period. In these cases, the early withdrawal penalty is waived.
There is a new credit for first time home buyers under the American Housing Rescue and Foreclosure Act of 2008. It is for first time home buys after April 8, 2008 and before July 2, 2009. It is a refundable credit equal to the lesser of 10% of the purchase price of the principal residence or $7500 for a married filing joint return ($3750 for married filing separately or single). There are some phase outs with respect to adjusted gross income and it applies to home buyers who have had no present ownership interest in a primary residence in the US during the 3 year period prior to the purchase of the new home. The difference between this credit and any others is that it must be REPAID over a 15 year period interest free. Repayments will start two years after the year in which the residence is purchased and must be made in equal payments over that 15 year period.
In 2008, only taxpayers who claim a standard deduction will be permitted to claim an additional deduction for the state and local property taxes paid. The deduction cannot exceed the lesser of state and local taxes actually paid or $500 ($1000 if married filing jointly).
Some new developments are also in place for Ohio with respect to residency requirements and the filing of the residency affidavit. If a taxpayer does not change domicile from or to Ohio during the tax year, then the individual is deemed to be a full time resident of the state of domicile. However if the taxpayer changes domicile during the year, he/she needs to meet the 183 contact period to be a resident of Ohio. If there are not 183 contact days in Ohio, then the taxpayer is deemed not to be a full time resident of Ohio. If the taxpayer is not a part time resident and has no intent of filing an Ohio tax return for the year and has an abode in Ohio, the affidavit must be filed. This is a snowbird bill!!
Well, that's what I know for now. I hope that you have enjoyed the summer and I look forward to seeing you at tax time.
If you feel that you would like to schedule some time to discuss your particular set of circumstances with respect to these or other items, please don't hesitate to call us to schedule a mutually convenient time to get together.
Patti
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