Tax Saving Moves for 2008

Tax Saving Moves for Individuals

Take Tax Free Capital Gains. Effective January 1, 2008 a 0% federal income tax rate on long-term capital gains and qualified dividends takes effect. If you have some appreciated stocks you have held for more than one year it may be a good time to sell and realize tas free capital gains. A new Administration and Congress in Washington could close this window of opportunity. This special rate applies to gains and dividends that are received by clients in the 10% or 15% regular income tax brackets. But even if your income is too high to personally cash in on the 0% rate, through gifting, you may have children, grandchildren, or other loved ones who might qualify.

Make an IRA Contribution. The 2008 Individual Retirement Account (IRA) contribution limit is $5,000 ($6,000, if age 50 or over). This is a nice way to defer income from tax and save for your retirement. You can make your contributions through April 15, 2009. Clients can even file early and use their tax refund to maximize their IRA contributions.

Manage Income for Full IRA Benefits. You can take the full IRA contribution deduction if your income is below $85,000 (married filing jointly) or $53,000 if you are single or head of household. Partial tax deductions are available if your income is between $85,0000 and $105,000 (married filing jointly) or $53,000 and $73,000 (single or head of household).

Make a Roth IRA Contribution. Depending on your income you may be eligible to make a Roth IRA contribution in 2008. The new inflation adjusted income phase-out ranges are between $159,000 and $169,000 for joint filers and $101,000 and $116,000 for singles. While your contributions must be made after tax, the earnings grow tax-free as long as long as retention and distribution rules are met.

Tax Saving Moves for Businesses

Deduct Bonus Depreciation. For business in 2008, there is a 50% first-year bonus depreciation deduction. Under this new first-year bonus depreciation provision, your business can immediately deduct half of the cost of a qualifying new asset if it is purchased and placed in service during callendar 2008.

Hint: An asset eligible for the 50% first-year bonus depreciation must be new (not used) and placed in use after December 31, 2007.

Take a Section 179 Deduction. Once again in 2008 businesses may elect to expense the purchase of qualified assets versus using depreciation. This Section 179 election may be made for up to $250,000 in purchases. Some limitations apply.