New Deductions Could Mean More Cuts
1 Mileage Increase
The standard mileage credit IRS gave in 2007 was 50.5 cents for business and 19 cents for medical or qualified moving trips. However, due to sudden gas price increases - and not-so-gentle congressional prompting - these expenses have gone up effective July 1 of this year. That is the tricky part. Thus, the reimbursement stays as is from January 1- June 30. However, from July 1 on, you can claim 58.5 cents for each business mile driven and 27 cents for medical and moving purposes. That could add up to some big change for those who drive a lot.
2 Bonus SUV Depreciation
If you buy a qualified SUV - new or used - you can elect to write off up to $25,000 of the business use of that vehicle. A qualified SUV is one that has a truck chassis, carries passengers and has a gross vehicle loaded weight of over 6,000 pounds.
Starting in 2008, if you buy a new qualified SUV, you not only get the above noted standard depreciation. You can also claim 50% bonus depreciation.
What this means to you is that if you buy a qualified SUV, you can write off as much as 80% of the business use of that vehicle in the first year!
Note that this bonus depreciation only applies to qualified SUVs placed in service this year! In addition, it doesn't matter when you buy the car. The depreciation and $25,000 election applies to the business use of the vehicle.
Example: Patrick buys a Cadillac Escalade in July for $60,000, using it 90% for business. Thus, the business use of his SUV would be 90% of $60,000 = $54,000. This year, he can deduct approximately $43,200 of the cost. If you want to take a sizeable bite out of your taxes, this will do it!
3 Increased Expense Allowance
In previous years, you were able to deduct up to $125,000 of equipment that you buy for your business by making an election on your tax return. This number has been doubled for equipment purchases in 2008 to $250,000.
Requirements: To make this election, you need to meet certain rules. First, you must use the equipment more than 50% for business. Second, the election can't create a loss, although any excess can be carried forward to future years. Finally, the equipment must be new to you. It doesn't have to be new. It just has to be new to you!
These are general tips based on IRS advisories. Check with your accountant about how these changes could impact your tax bill._n
Sandy Botkin is a CPA, tax attorney and president of the Tax Reduction Institute. He has two home study courses, which are offered members at a discount: "Tax Strategies for Business Professionals," and " Wealth Building Tax Secrets of the Rich." He also has two published books, "Lower Your Taxes: BIG TIME" and "Real Estate Tax Secrets".
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