Tax Tips
Changes for 2008
source:  Charitable Contributions
Effective for non-cash contributions made after August 17, 2007,
no deduction is allowed for a charitable contribution of clothing
or household items unless the clothing or household item is in good
used condition or better.
The substantiation rules for money contribution will follow the
same substantiation rules as property in 2007. In the case of a
charitable contribution of money, regardless of the amount, must
have a record of the contribution showing the name of the donee
organization, the date and the amount of the said
contribution. This record must be in the form of a bank record or
a written communication and may not be substantiated by any other
written records. In the case of both cash and non-cash donations,
taxpayers could be subjected to penalties for inflated values.
Standard mileage rate
The standard rate for business mileage increases to 50.5 cents
per mile in 2008. The standard mileage rate for medical or moving
expenses has been decreased to 19 cents per mile. The mileage rate
for charitable purposes remains at 14 cents per mile.
Section 179 deduction dollar limit
In 2008, the maximum Section 179 expense available on equipment
purchases will increase to $128,000. This amount will be subject
to a dollar-for-dollar phase out once the cost of property placed
in service exceeds $510,000.
Payroll Tax
In 2008, employers and employees will continue to pay 6.2% each
for Social Security tax (old-age, survivors, and disability insurance),
and 1.45% each for Medicare tax (hospital insurance). For Social
Security tax, the minimum amount of wages subject to the tax increases
to $102,000. For Medicare, all covered 2008 wages are subject to
the tax.
Payments for the services of a minor who works for his or her parents
in a family owned trade or business are not subject to social security
and Medicare taxes if the trade or business is a sole proprietorship
or a partnership in which each partner is a parent of the child.
If these services are for work other than a trade or business, such
as domestic work in the parent’s home, they are not subject
to Social Security or Medicare tax until the child turns 21 year
old.
Self Employment Tax
The self-employment tax (SE tax) is a Social Security and Medicare
tax primarily for individuals who work for themselves. Currently,
this rate is 15.3%. This rate consists of 12.4% for the Social Security
tax (old-age, survivors, and disability insurance) and 2.9% for
Medicare (hospital insurance). You do not have to pay SE taxes if
your net earnings from self-employment is less than $400.
The SE tax rules apply no matter how old you are and even if you
are already receiving Social Security or Medicare. You can deduct
half of your SE tax in figuring your adjusted gross income (AGI).
This deduction only affects your income tax, but does not lower
your net earnings from self-employment.
Federal Unemployment (FUTA) Tax
The Federal Unemployment Tax Act (FUTA) provides payment of unemployment
compensation to workers who have lost their jobs. Generally, you
are subject to FUTA if you paid employee wages (other than farm
workers or household workers) of $1,500 or more in any calendar
quarter or you had one or more employees for at least some part
of a day in 20 or more different weeks.
If you have household employees, you are subject to FUTA tax only
if you paid total cash wages of $1,000 or more in any calendar quarter.
A household worker is an employee who performs household work in
a private home, local college club, or local fraternity or sorority
chapter.
Most employers pay both a federal and a state unemployment tax.
For 2008, the FUTA tax rate is 6%. The tax applies to the first
$7,000 you pay each employee. Generally, an employer can take a
credit against your FUTA tax for amounts that you paid into state
unemployment funds. This credit cannot be more than 5.4% of taxable
wages.
For more information-> www.irs.gov/publications
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