Last minute tax updates for this year – get ’em while they’re hot:

1.  The bailout law enacted the above-the-line deduction for higher education costs.  Take up to $4,000 in deductions this year because of this new law – a direct reduction to your taxable income. THRIVEAL TAX IDEA: pay January 2009 tuition early in 2008 to get the deduction.  But make sure you compare the education credit to this deduction to see which one would benefit you the most.  Credits and deductions are different.

2.  Deduct property tax payments even if you don’t itemize.  Normally, only if you itemize can you deduct your vehicle and home’s property tax payments.  If you use the standard deduction, you don’t get to take advantage of these large deductions.  But for 2008 and 2009 only, individuals can take the standard deduction AND deduct state and local property taxes on their tax returns.  THRIVEAL TAX IDEA: let your grandmother know about this law, because low-income elderly are usually the ones subject to the limitation of having to take the standard deduction without the benefit of deducting their property taxes.

3.  You get to take bonus depreciation in 2008 only.  Bonus depreciation is equal to 50% of property placed in service in the calendar year 2008.  This is above your normal depreciation and in addition to section 179 right off!  Pretty sweet.  As long as you got the equipment in 2008 or “place it in service” in 2008, then you can write off 50% of it before applying other depreciation.  THRIVEAL TAX IDEA: this write off is for the calendaryear 2008, so if your business year end is September 30th (as an example), then you can take this 50% write off twice.  Take it in one fiscal year (after January 1 but before September 30th) and then take it again the next fiscal year (after September 30th but before December 31st).  Stick it to Uncy Sam.

4.  You can write off your building improvements over 15 years instead of 39 years.  The bailout law extended this provision through 2009, but you can take it in 2008 as well.  Its intended for leasehold improvements and qualified restaurant property.  THRIVEAL TAX IDEA: cautions – (1) make sure these upfits are made according to a lease agreement to get the accelerated write off, (2) the building needs to be in use for three years before applying this, and (3) the lease can NOT be between related parties to take advantage of this provision (i.e. between you and yourself). 

Thanks, Jason M. Blumer, CPA

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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