As You Prepare to File; Take Note of Major Tax Changes for 2008
by Caron_Beesley, Community Moderator
- Created: February 16, 2009, 4:12 pm
- Updated: May 26, 2011, 4:26 pm
As you prepare to file your small business tax return, you'll need to be aware of several new tax laws that went into effect in 2008.
What I've summarized below is limited to the major changes as they pertain to small business interests, if you need information about new tax law and the 2008 filing season, check out the 2009 Small Business Tax Center on Business.gov. This one-stop shop online portal helps business owners stay abreast of tax requirements, tax changes and a whole range of tax tips to help you prepare for the year ahead.
2008 Tax Law Changes that Impact Small Business
The following list of 2008 federal income tax law changes is drawn from information provided by the IRS and the National Association for the Self Employed (NASE). Many commercially available tax preparation software tools do take these changes into account, but do your due diligence first.
This is not a comprehensive list, so be sure to talk to your tax advisor if you have questions about how your small business is impacted.
- First-Time Homebuyer Credit - If you operate your small business from an office situated within a first-time home purchase, you may qualify for additional tax incentives - if you purchased your home between April 2, 2008 and June 30, 2009. According to NASE, you may be eligible for a $7,500 credit, which is similar to a 15-year interest-free loan.
- Contribution Limits for IRAs and Other Retirement Plans - If you contribute to an IRA and are not covered by a workplace retirement plan but are married to someone who is covered, you don't qualify for a tax deduction if your combined income is between $159,000 and $169,000.
- Bonus First-Year Depreciation - As a small business owner, you can take advantage of former President Bush's February 2009 Economic Stimulus Act, which permits business taxpayers to claim a bonus first-year depreciation deduction on qualified depreciable property. The additional depreciation deduction is equal to 50 percent of the adjusted basis of the eligible property. There is no limit on the amount of the deduction.
- Payroll Tax Changes - The maximum amount of wages subject to Social Security tax increased in 2008 from $97,500 to $102,000. That means if you have employees, you should stop making (and paying) Social Security taxes once they reach $102,000 in eligible earnings in 2008. The tax rate remained at 7.65 percent on employers and employees.
- Alternative Minimum Tax (AMT) Exemption Increases - For tax-year 2008 only, the exemption for a married couple filing a joint return is $69,950, up from $66,250 in 2007; $34,975 for a married person filing separately, up from $33,125 and $46,200 for singles and heads of household, up from $44,350.
Help for the Financially Distressed
In addition to the tax breaks introduced in 2008, the IRS is also reaching out to taxpayers who are unable to meet their obligations during the current economic slump with tax credits, deductions and additional outreach tactics.
However, if you are unsure whether you can meet your tax obligations for 2008 your best bet is to be proactive - reach out to the IRS directly.
Visit www.IRS.gov or its small business page for more information on how the agency is working to help business owners in financial distress. You can also refer to Business.gov for small business resources.
Coming Next - Tax Changes for 2009
Don't miss my next post, which will focus on tax changes for 2009 and how these should be rolled into your tax planning for the year ahead.
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