As the calendar year draws to a close, taxpayers should review their potential tax savings and develop strategies that will pay off now as well as in the years to come.
Economic stimulus legislation enacted earlier this year extended many popular deductions:
- The alternative minimum tax (AMT) patch increases AMT exemption amounts for single filers to $46,200 and married filers to $69,950, allowing more middle income taxpayers to avoid the AMT.
- The state and local sales tax deduction allows an individual to deduct sales tax instead of state and local income tax when itemizing deductions.
- Homeowners that don’t itemize can deduct real estate taxes by increasing their standard deduction up to $1,000 for married filers ($500 single).
- Tax Free Distributions from IRA for Charitable Contributions benefit those 70½ or older who don’t itemize deductions. They can transfer IRA distributions directly to a charity without paying tax on the distribution. This distribution also qualifies as a required minimum distribution.
- The Mortgage Forgiveness Debt Relief Act, extended through 2012, allows homeowners to exclude up to $2 million of forgiven mortgage debt from income.
- The Energy Efficient Commercial Building Credit is available for buildings meeting certain energy standards through 2013. For a public building, this credit can be used by the contractor or architect.
- Enhanced Bonus Depreciation allows qualifying businesses to take 50% of the purchase price of certain business equipment purchased in 2008.
- The Section 179 Expense Limit allows businesses to expense up to $250,000 the purchase price of qualified business equipment purchases in 2008.
By taking the time to prepare now, you will be able to develop a clearer picture of what your tax liability for 2008 will look like while there's still time to maximize current-year tax savings.
Barb is a Tax Partner with Cherry, Bekaert & Holland, L.L.P. (CB&H). She can be reached at firstname.lastname@example.org or 757-456-2400..