Understanding new tax changes can Yield Big Benefits
If you haven’t used a tax professional in the past, this just might be the year to start. The first half of 2008 has seen a number of laws, rate changes and deductions that can favorably impact your tax bottom line. That is, if you know about them.
New mileage rates effective July 1, 2008.
The IRS announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.
The rate increased to 58.5 cents per business mile beginning July 1 through Dec. 31.
This is an increase from the 50.5 cents per mile that has been in effect for the first six months of 2008.
The optional rate for medical or moving miles increases to 27 cents per mile. The rate for charity remains at 14 cents per mile.
"The recent rapid increase in gasoline prices is what prompted the IRS to act now and make this adjustment," explained Cindy Hockenberry, EA, NATP tax analyst. "Typically the rates are adjusted once
a year for the next calendar year. While this is good for taxpayers, it bears reminding that accurate recordkeeping is even more critical this year."
Incentives for businesses to stimulate the economy in 2008.
The same Stimulus Act that delivered many taxpaying Americans some extra cash this spring also included a provision to encourage businesses to make economy-stimulating purchases in 2008 in an effort to help out the current slump.
The Act increases the deduction under Section 179 to $250,000 for purchases of business assets that are placed in service in 2008.
This deduction applies only if you elect the deduction. These incentives can provide a significant tax savings for taxpayers, but it is not automatic – you must elect to take it.
These incentives also include a special 50-percent depreciation allowance for 2008 purchases for tax years beginning in 2008. As defined by the IRS, depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over several years.
"This year is unique," explained Hockenberry.
"This 50-percent depreciation allowance only applies to new items purchased and placed in service in 2008. The benefit expires on Dec. 31, 2008."
Military members and their families receive tax relief.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) was signed into law, providing targeted tax relief for members of the military and their families. Some highlights of the Act include:
• A clarification that those in the active military who file a joint tax return are eligible for the stimulus rebate payment, even if one spouse does not have a social security number.
•A permanent exception that permits qualified mortgage bonds to be issued to finance mortgages for qualified veterans who served in the active military without regard to the first-time homebuyer requirement.
•The ability to include combat pay as earned income for purposes of the Earned Income Tax Credit.
• A new requirement that tax-qualified retirement plans must provide that if a participant dies while performing qualified military service, his or her survivors would be entitled to any additional benefits that would have been provided had the participant resumed employment and then terminated employment on
the account of death.
The Heroes Act also includes many other provisions to consider for military members and their families.
To learn more about the tax laws and provisions listed here, contact a professional tax preparer.
Members of the National Association of Tax Professionals (NATP) work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has more than 18,600 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys, and financial planners. Learn more at
NATP is a nonprofit professional association founded in 1979 to serve professionals working in all areas of tax practice through professional education, tax research, and products. The national headquarters, located in Appleton, WI, employs over 40 staff members.