JULY 2008

Due to rising gas prices, the mileage rate will increase by eight cents to 58.5 cents a mile for all business miles driven from July 1 through December 31, 2008. The new rate for computing deductible medical or moving expenses will also increase by eight cents to 27 cents a mile.

2007 UPDATES

Standard Deductions:

• Married Filing Joint and Surviving Spouses $10,700
• Heads of Household $7,850
• Unmarried individuals $5,350

Personal Exemption:
$3,400 per taxpayer, spouse and dependent.
The exemption amount for taxpayers with AGI in excess of the maximum phase-out amount is $1,133.
AGI Phase-out begins at:
$234,600 for Married Filing Joint
$195,500 for Head of Household
$156,400 for Unmarried Individuals
$117,300 for Married Filing Separate

Mileage Rates:

• 48.5 cents per miles for business miles driven
• 20 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service to a charitable organization

Retirement Plan Contribution Limits:
Roth IRAs and Traditional IRAs- $4,000 for individuals under age 50 or $5,000 if you are over 50
401k- $15,500
SIMPLE- $10,500
SEP- the smaller of 25% of an eligible employee’s compensation or $45,000

Charitable Contributions
Due to the Pension Protection Act of 2006, the rules on recordkeeping for charitable contributions became a little more strict, beginning in January 2007.
To deduct a charitable cash donation, regardless of the amount, you must now have either a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank statements. Contributions must be made to a qualified organization, and donations such as clothing and household items must be in good condition. Vehicle donations are subject to special rules.
As in the past, charitable contributions are deductible only if you itemize deductions on Schedule A of your 1040 tax return.

Health Savings Account (HSA)
Beginning in 2007, you can fund your HSA by making a one-time direct transfer from your IRA to your HSA. The maximum deductible contribution is no longer limited to the annual deductible under the high deductible health plan.

Annual Exclusion for Gifts
The first $12,000 of gifts to any person (other than gifts of future interests in property) is not included in the total amount of taxable gifts made during the year.

The following credits and deductions have been extended through the 2007 tax year:

• Tuition deduction
• Teacher deduction
• Medical savings accounts
• State and local sales tax deduction
• Election to include excluded combat pay as earned income for purposes of the EITC
• Work Opportunity Tax and Welfare-to-Work credits (with changes)
• Research credit
• New Markets Tax credit
• Energy deductions and credits
• Depreciable life of fifteen years for qualified leasehold improvements and restaurant property
• Taxable income limit for percentage depletion of oil and natural gas produced from marginal properties
• Corporation donation of scientific property used for research and of computer technology and equipment

Mileage Logs — Just a reminder to go out and check your odometer at the beginning of the year so you can update your written mileage log. Of course, your log is probably written and has the beginning mileage on the vehicle for the year as well as the ending mileage and shows the actual miles driven for each business use... We thought so! The IRS is getting picky so we all need to get more diligent in our documentation. A&E also has mileage logs in the office if you would like to pick one up.