900 N. Kings Highway, Cherry Hill, New Jersey 08034
856.667.4100 · 215.563.0276 · Fax: 856.667.3652

The Online Advisor

May 2008


What's New in Taxes
You may be able to find tax-saving options in new 2008 rules


The tax law seems to change year-to-year. This year is certainly no exception. With careful planning, you can take advantage of new tax-saving opportunities in 2008 while avoiding potential pitfalls. Here's a summary of several key provisions.

* Capital gains and dividends
The maximum tax rate on net long-term gain and qualified dividends for taxpayers normally in the 10% or 15% regular income tax brackets is reduced from 5% to 0% for 2008. Under current law, the 0% rate will remain in effect through 2010.

This may be a good year to have your children sell securities that have appreciated in value. However, such sales may trigger "kiddie tax" complications.

This tax break isn't strictly limited to lower-income taxpayers. If you can push your taxable income for 2008 below the cut-off point for the regular 25% tax bracket - perhaps by increasing charitable gifts or 401(k) contributions - your long-term capital gains and dividend income could qualify for the 0% rate.

* Small business assets
Under the new economic stimulus law, your business can currently deduct up to $250,000 of business assets placed in service in 2008. Previously, the inflation-indexed amount for this "Section 179 deduction" was $128,000. In addition, a business may elect "bonus depreciation" in 2008 equal to 50% of the cost of qualified assets.

If handled correctly, your business can combine the enhanced Section 179 deduction with bonus depreciation. Regular depreciation deductions may be claimed for any remainder.

* Mortgage insurance
Congress previously approved a one-year deduction for mortgage insurance premiums in 2007. A full deduction was available for taxpayers with an AGI of $100,000 or less. Once income exceeded $100,000, the deduction was phased out.

The new mortgage relief law extends this tax break for three years through 2010. Therefore, you may qualify for a 2008 deduction for amounts paid or accrued this year.

* Kiddie tax
Under the kiddie tax, a child's investment income above an annual threshold ($1,800 for 2008) is taxed at the top tax rate of his or her parents. Prior to this year, the kiddie tax applied to children under age 18. But now the rules have changed.

Beginning in 2008, the kiddie tax generally applies to your children who are under age 19 or full-time students under age 24 if they can be claimed as your dependents.

To minimize the tax damage, try to keep investment income of children below or near the $1,800 threshold. For example, you might have a child switch funds into tax-deferred or tax-free investment vehicles.

* IRA contributions
If you contribute to an IRA, the contributions may be fully or partially deductible. Although deductions are generally not available to high-earning taxpayers if either spouse participates in an employer's retirement plan, contributions may still grow on a tax-deferred basis until withdrawn. The contribution limit for the 2008 tax year increased from $4,000 to $5,000. Plus, if you're age 50 or older, you can add a "catch-up contribution" of $1,000. The contribution deadline for 2008 is April 15, 2009, but you may earn more by contributing earlier.

Finally, a word about the new economic stimulus payments the IRS has been distributing: These rebates aren't available until you've filed your 2007 return, so taxpayers with extensions have to wait. Certain individuals who normally aren't required to file returns - such as those receiving social security benefits - may follow a simplified filing procedure.

Contact our office for details or guidance with your 2008 tax planning.





For details or for assistance with your tax planning, give our office a call.

[Current Online Advisor] [Business Information] [Home]

 

 

untitled

This site designed and maintained by the Information Technology experts at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co.

We appreciate comments concerning our website. Contact our webmaster .