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Tax Facts & Helpful Tips
1. CAPITAL
GAINS & LOSSES - Unfortunately for stock market investors, net* losses are limited to $3,000.
Extraordinary stock market gains coupled with the changes in capital gains law make
for increased tax-time headaches. First tip, keep detailed records of your stock
trades on a ledger pad, a spreadsheet program (first choice) such as Excel, or a personal financial
program/electronic checkbook like Quicken
(last choice). Many online brokers provide the capability to
download your transactions into reporting software such as GainsKeeper® or
TradeLog®. (Follow the links for my comments on these)
* Net losses are the combination of long-term capital gains and long-term
capital losses coupled with short-term capital gains and short-term capital
losses.
Another detail to watch for
are wash sales. A wash sale is the sale of a stock or security for a
loss (it does not apply to gains) that is accompanied by the purchase of similar
stock or security within 30 days before or after the sale that
triggered the loss. These are difficult to spot and are NOT properly
recognized or treated by most popular do-it-yourself tax software packages.
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BUNCHING
DEDUCTIONS - Do you seem barely to miss itemizing deductions each
year? Do you have significant medical or dental expenses planned for the
upcoming year? Try bunching your deductions. Pay your medical
expenses, two years of property taxes and make your year-end contributions in
January and December of one year. You will probably qualify to itemize in
that year. The next year, when your itemized expenses are low, take the
standard deduction. What about mortgage interest? You can only
deduct what would normally be payable in that year ... monthly mortgage ...
twelve months of mortgage interest. 3.
SECTION
179 INCREASE - The election to expense capital acquisitions has increased to $112,000 in
2007 with a maximum investment limit of $450,000. However, only certain types of assets
qualify for this election. It must be tangible personal property and not
assets such as buildings or luxury autos (which still fall under the luxury auto
limit rules). Also, for Section 179 expensing to apply the property must
be used in an active trade or business (not rental or
investment property) AND the Section 179
expense cannot create a loss for that business.
4.
STATE TUITION PROGRAMS - The earnings on contributions from
state tuition programs for educational purposes are taxable when distributed even if used
for education, unlike educational IRAs which are not taxable when distributed if used for
educational purposes. Each distribution is taxable pro-rata as return of basis (no
tax) and earnings (taxable) thus preventing the contributor from waiting until retirement
... when the last child's education is paid for ... and then taking all the earnings in
that year.
5.
SALES TAX EXEMPTIONS (TEXAS) - There is much confusion at
retail establishments when attempting to purchase "sales taxable" items for a tax-exempt
entity. Most check-out clerks are looking for a tax-exempt certificate with your
company's tax-exempt number. In the state of Texas there is no tax-exempt
number. All that is necessary is to present the clerk with a
Texas Sales
Tax Exemption Certificate. The form must be completely filled-out and signed by the
appropriate authority and presented at the time of purchase or mailed with payment less
sales tax. You can also find a
fill-in-the-blank copy of this form on the Forms page of
this website along with other helpful forms.
If you need to apply for tax-exempt status in
Texas, here are forms you can use:
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FYI ...
Do we need tax reform?
It has recently been stated that a
BILLION is the new MILLION ... well, here are some facts about a BILLION
that you may find interesting:
As of January 31, 2008 ...
- One Billion SECONDS ago it was
May 27, 1976
- One Billion MINUTES ago it was
October 18, 107 (Yes, that is the year 107)
- According to the latest approved
budget of the US Government, published by the OMB for fiscal year
2008, the federal government spends $1 Billion every 3 hours
Yes, we need tax reform, but what we really
need is ... LESS GOVERNMENT!!
Source: www.whitehouse.gov/omb/budget/fy2009 |
6. HOME
SCHOOL EDUCATOR DEDUCTION - Although the deduction is not that large
and available through the 2007 tax year (thanks to the Tax Relief and Health
Care Act of 2006), home
school teachers ARE eligible for educator deduction if they meet the
criteria described in the Internal Revenue Code. I have written an
extensive treatment on this issue and it is available
here. [However,
be aware that the IRS says it will not grant home-schoolers this deduction]
It is $250 and any excess is deducted as a Miscellaneous Itemized Deduction
on Schedule A.
7.
AUTO MILEAGE RATES - The following are the mileage rates for
2007 and 2008:
| |
2007 |
2008 |
| Business
miles |
$0.485 per mile |
$0.505 per mile |
|
Depreciation portion of business miles |
$0.170 per mile |
$0.170 per mile |
| Medical
or Moving miles |
$0.200 per mile |
$0.190 per mile |
| Charitable
miles |
$0.140 per mile |
$0.140 per mile |
(Yes, the business mileage rate
increased and the medical/moving rate decreased.)
8.
NON-CASH CHARITABLE CONTRIBUTIONS - As of August 17, 2006, the IRS
will deny any claimed charitable contribution of clothing or household items
unless it is in "good" or better used condition. Obviously this is a
subjective assessment and typically made by the contributor who has a vested
interest in the deduction. Further, the drivers of the company truck
or volunteers at a donation site are probably not qualified to determine the
quality of a used household item.
So, with that said, how do you set a value on
used goods? The typical value is termed "thrift shop value" or the
price that your item would sell for at a thrift shop, ie, Goodwill or
Salvation Army Thrift Stores. I have researched the Internet and, with
the help of my wife, canvassed local (Dallas-Garland, TX) thrift shops to
determine some valuation ranges for a number of items. Click
here for
those guidelines. 9.
FREE CREDIT REPORT - This is not a "tax" tip per se, but it is
helpful. Did you know that according to the Fair and Accurate Credit
Transaction Act of 2003 (FACTA) you are entitled to an annual FREE credit
report from EACH of the three major credit reporting bureaus - Equifax,
TransUnion and Experian. Simply go to
www.annualcreditreport.com
and complete the personal information request. |
