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Tax Tips and Advice that could save you thousands!
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Tax Topics:
It's official: 2007 has finally given way to 2008. In just a few short months, on April 15, your 2007 taxes are due. And even if you file for an extension—giving yourself until Oct. 15 to file your returns—the time has passed for making a significant impact on your 2007 tax burden. Luckily, 2008 has just started, making it the perfect time to employ tax-saving strategies for the coming 12 months.
In pursuit of such strategies, Rockland Business Developments team of tax professionals are offering you their very favorite tax tips. Consider them closely as you work with our accountants to make your own New Year's tax resolutions.
Charitable Donations: Keep track of all the money you give to charity this holiday season. The amount you donate (including the expense of donated toys, clothing and/or food) can be deducted as a contribution if it's properly itemized on your tax return.
2008 Mileage Rate: The IRS recently announced that the 2008 standard business mileage rate will be 50.5 cents per mile. This is an increase of two cents over the 2007 rate of 48.5 cents per mile.
Medical Expenses: In order to deduct your medical expenses, they must be more than 7.5 percent of your adjusted gross income and you must be able to itemize deductions. Your health insurance premium is included in your medical expenses and needs to be documented in Schedule A.
Home Business Depreciation: Multiply the basis of the home (not including land) by the ratio of business use square footage to total square footage of the home.
Mortgage Deductions: One nice feature of home equity loans is that borrowers may get a tax deduction on interest paid for the loan. However, the interest deduction from your home equity loan is not unlimited. You can generally deduct interest you pay on the first $100,000 of a home equity loan. You may use a home equity loan as part of a debt consolidation program, and by doing this - the interest you pay becomes tax deductible, not just an expense. Taxpayers can claim a deduction on interest paid on a loan secured by their first or second home. For details on how a home might qualify, see IRS Publication 936 Section 1.
Bankruptcy: Debts discharged through bankruptcy aren't considered taxable income.
Insolvency: If you're insolvent when the debt is cancelled, the cancelled debt may not be taxable to you.
Note: You're considered insolvent when your total debts are more than the fair market value of your total assets.
Business taxes: Businesses can deduct all business expenses from their revenues to reduce their taxable income. Some deductions include - expenditures in business travel, equipment, salaries, or rent.
Here are some other potential deductions:
Business losses: Business losses can be deducted against a business owner's personal income to reduce taxes. If a business owner's losses exceed personal income for the year, some of the year's business losses can be used to reduce taxable income in future years.
Trips that combine business and pleasure: If more than half of a business trip is devoted to business, deduct the traveling costs, as well as other business-related expenses.
Employee Taxes: If a business has employees, a variety of taxes will have to be withheld from their salaries. Including:
Withholding: Social Security (FICA), Medicare and federal and state income taxes must be withheld from employees' pay.
Employer matching: Businesses must match the FICA and Medicare taxes and pay them along with employees.
Unemployment tax: Businesses must pay federal and state unemployment taxes.
Employ Your Children: While they're an income drain, according to most parents, kids are actually an income opportunity. We suggest putting your children on your payroll as employees in 2008 in order to reward them—and yourself—for their help at the office.
"Simply direct wages for legitimate work done by the child." "The child is not taxed on the first $5,450 of earned income because it's sheltered by the standard deduction. If the parent is self-employed or an LLC, the child pays no Social Security taxes as long as they are under 18."
When you use your kids' earnings to pay for their activities, such as sports training, music lessons or tutoring sessions, the result is that a portion of their education becomes, essentially, tax deductible. "If you combine this idea with other concepts, like gifting appreciated assets to your child for them to sell to pay for education expenses, or gifting them business property and leasing it back from them, you could find the 'tax scholarship' you can give them will be quite substantial."
Sales Taxes: Most services remain exempt from sales tax, but most products are taxable (typical exceptions are food and drugs). If a business owner sells a product or service that is subject to sales tax, he or she must register with the state's tax department. Then taxable and nontaxable sales must be tracked and included on the company's sales tax return.
For additional Tax Tips and Business Advice call Rockland Business Development and schedule a Free Consultation, with one of our expert advisors, at (888) 866-1141.
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