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The Online Advisor

November 2008


What's New in Taxes
Act fast to identify ways to reduce your 2008 tax bill

Year-end is fast approaching, but it's not too late to reduce your 2008 taxes. Consider the following possibilities for actions you can take to cut your 2008 tax liability.

* Capital gains. There is a new zero tax rate on long-term capital gains and qualified dividends for taxpayers in the regular 10% and 15% tax brackets. If you're single with taxable income under $32,551 or married filing jointly with income under $65,101, the zero rate applies to you. A review of your portfolio might allow you to identify stocks that can be sold with no taxes on the gains.

* IRA contributions. Contributions for Roth and traditional IRAs have been increased to $5,000 for 2008. And those age 50 or older by the end of the year can add an additional $1,000 as a "catch up" contribution, making their total contribution $6,000.

* Kiddie tax. The kiddie tax now applies to children with more than $1,800 of unearned income if they are under age 19 (under age 24 for full-time students). If you have dependent children with investment income, they could be subject to this tax. Now is the time to review their income sources and consider moving them into investments that are more kiddie tax friendly.

* Equipment purchases. Business owners can elect to expense the cost of buying equipment rather than depreciating the cost over the life of the asset. For 2008, the expensing limit is $250,000, and it applies to both new and used equipment purchases. Another 2008 provision applies only to new equipment purchases. It lets you take 50% bonus depreciation on qualified assets placed in service by December 31, 2008.

* Stock losses. With the stock market in turmoil, be aware that you can sell stocks at a loss and use that loss to offset gains on other stock sales. Additionally, if your losses outstrip your gains, you can deduct up to $3,000 of those losses to offset other income.

* Tuition expenses. The deduction for qualified tuition expenses was reinstated in the financial bailout law. This allows for an above-the-line deduction of up to $4,000 in qualified tuition expenses paid, depending on the taxpayer's income level. Paying tuition before the end of the year could create a valuable deduction. Also reinstated was the teacher expense deduction, which allows for a deduction of up to $250 for the purchase of classroom supplies.

For a review of tax-cutting options appropriate for your particular situation, contact our office soon.


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

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