News:
Read Current or Back Issues of our Monthly Newsletter, Client Line
FEDERAL MINIMUM WAGE INCREASE COMES 7/24/08
Effective 7/24/08, the federal minimum wage for covered non-exempt employees will rise from $5.85 to $6.55 per hour. Many states also have minimum wage laws. Covered employers must comply with both. The tip credit provisions remain the same. An employer is still only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage. The youth minimum wage remains the same. Employees under 20 years of age may be paid $4.25 per hour.
IDENTITY THEFT/CREDIT CARD FRAUD
No one wants to deal with identity theft, credit card fraud or repairing credit history because someone stole a pre-approved credit card application. OptOutPrescreen.com is a source for reducing pre-approved credit card offers. Make sure you check out the very informative frequently asked questions link. If you prefer not to use the web, you can call 1-888-567-8688.
MUNICIPAL BOND RULING (7/14/08)
In 2003 two taxpayers living in the state of Kentucky filed suit against the state contending that Kentucky's policy of taxing out-of-state municipal bond income but not income from Kentucky bonds violated several clauses of the Constitution. A Kentucky appeals court subsequently agreed with the taxpayers. This ruling would have an adverse impact on the value of munis from certain states, including Missouri that offer big in-state tax advantages. The United States Supreme Court recently ruled that state and local governments are allowed to continue to offer income tax breaks on the bonds they issue.
CHANGES IN FEDERAL TAX LAW
Credit for First-Time Home Buyers
Under The Housing Assistance Tax Act of 2008, first-time home buyers may be eligible for a tax credit of $7,500 or 10% of the home's purchase price, whichever is less. The credit is available for homes purchased between April 8, 2008 and before July 1, 2009. You don't necessarily have to be buying a principal residence for the first time to qualify. You are considered a first-time home buyer if you and your spouse have not owned a principal residence for the three year period prior to purchasing your home. Income limits apply. This credit has a catch. It must be PAID BACK over 15 years starting the second year after the purchase. Effectively, the credit is an interest free loan.
New Tax Deduction for Non-itemizers
If you own a home and claim the standard deduction rather than itemizing on your income tax return, for the 2008 tax year only, you may claim an additional standard deduction for state and local property taxes paid in the amount of $1,000 for joint filers. It is $500 for all other eligible filers.
A Reduced Benefit for Some Home Sellers
If you sell a home after 2008 that was not your principal residence for the entire time you owned it, you may lose the full benefit of the $250,000 ($500,000 on a joint return) capital gain exclusion
2008 Changes to Rules for Bonus Depreciation and Expensing Deductions
Prior to the Economic Stimulus Act of 2008 (The Act), the maximum expensing deduction under Section 179 of the Internal Revenue Code for 2008 as adjusted for inflation was $128,000. This deduction amount was phased out as qualifying asset purchases exceeded $510,000. The Act increases these amounts only for 2008 to $250,000 and $800,000.
The Act also made changes to the bonus depreciation provisions of Section 168(k) of the Internal Revenue Code. The provisions of Section 168(k) are separate and distinct from those of Section 179. The new rules allow first-year bonus depreciation for qualifying new tangible personal property acquired and placed in service during calendar 2008 equal to 50% of the asset's cost.
The Act contains provisions dealing with, among other things, pass-through entities, disaster area incentives, fiscal year provisions, and claiming the Section 179 deduction on amended returns.
NOTE: These changes apply at the Federal level. States may or may not adopt them.
Change in Federal Mileage Rates
In recognition of increasing gasoline prices, the IRS has announced an increase in the optional standard mileage rates for the second half of 2008. The standard mileage rate for business miles driven from July 1, 2008, through December 31, 2008, will be 58.5 cents per mile, an increase of eight cents over the rate for the first half of the year. The standard mileage rate for medical and moving expenses has been increased to 27 cents per mile from 19 cents per mile. The standard mileage rate for charitable purposes, however, remains unchanged at 14 cents per mile.
Changes in the Kiddie Tax
Under old law, unearned income of certain children under age 14 was subject to tax at their parents' marginal rate. In 2006, the age increased to children under age 18. Starting in 2008, the provision expands the kiddie tax to apply to children who are:
a) 18 years old, or
b) Full time students over age 18 but under age 24
The expanded provision applies only to children whose earned income does not exceed one-half of their support. Children under age 18 who are self-supporting are still subject to the kiddie tax regardless of the source of their income.
IRS Circular 230 Disclosure:
To ensure compliance with requirements imposed by the IRS in Circular 230, we inform you that, unless we expressly state otherwise in this communication (including any attachments), any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or other matter addressed herein.