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What's
Ahead for 2008
Auto Mileage Allowance
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Effective January 1,
2008, the standardized IRS mileage reimbursement rate for business use
of an automobile has been increased.
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Business use is
reimbursed at 50.5 cents per mile.
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Moving and medical use
is reimbursed at 19 cents per mile.
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Charitable use is now
14 cents per mile.
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Taxpayers should consider
using the actual expenses for greater deduction.
Reduced capital gains rate
extended
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Previously reduced capital
gains rates will continue through 2010.
Several Tax Deductions in Limbo
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Deductions granted under the
Bush tax cuts several years ago, are once again set to expire. Last year-end,
Congress extended the deductions for one year. The status of these deductions
for 2008 is still undeterminable since Congress is using the tax code for
political purposes in this election year. This makes tax planning more of a
guessing game than we would like.
These deductions have
not yet been extended to 2008:
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College tuition and fees
deduction.
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State & local sales tax
deduction.
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Educator expense deduction.
Kiddie Tax extended
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Kiddie tax will now apply to
parents with children up to age 18. And it gets worse...
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If child is a full-time student, the Kiddie
tax will apply up to age 23, unless the child's earned income is greater than
half his/her support.
Rollovers to a Roth is permissible
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Beginning in 2008, taxpayers
are allowed to roll a distribution from a qualified retirement plan, 403b or
457 plan into a Roth IRA.
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Caveat...the rollover will
be subject to Roth conversion rules, which comes with a hefty tax.
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Prior to 2010, only
employees with adjusted gross income under $100K may roll into a Roth.
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Rollovers into traditional
IRA are still permissible, without incurring tax or being restricted by income
levels.
Roth Conversion in 2010
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Higher income taxpayers may
convert a traditional IRA to a Roth, regardless of income, in 2010.
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For 2010 conversions, the
tax incurred can be spread over two years- 2011 and 2012.
Roth IRA contribution limits increase
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Contributions limits rise to
$5,000 in 2008.
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This amount will be indexed
to inflation in future years.
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Those age 50 or higher will
be able to contribute an additional $1,000.
Elective deferrals indexed to inflation
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Contribution limits to 401k,
403b, SEP and 457 plans will increased in line with inflation.
Phase-outs being phased out
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Itemized deductions and
personal exemptions have been phased out for higher income earners.
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For 2008, only one third of
the phase out amount will apply.
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In 2010, the phase-outs are
scheduled to be fully eliminated, subject to further Congressional tinkering.
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