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Staples.com® | Expert: Barbara Weltman
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Tax Expert: Barbara Weltman

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New Tax Breaks for 2008

Q: Are there any new tax breaks small businesses should know about for 2008?

A: Yes. Cost–of–living adjustments and new law changes effective in 2008 provide larger tax breaks. Here are some beneficial items for business owners (and their staff) to note:
  1. Increased deduction limit for capital investments
    Small businesses can opt to expense (deduct immediately) up to $128,000 of equipment purchases (computers, office equipment, and off–the–shelf software) instead of depreciating them over five or seven years, or longer periods of time.
  2. New retirement plan breaks
    Limits on contributions and benefits under qualified retirement plans, such as profit–sharing plans and simplified employee pensions (SEPs), have increased over 2007 amounts. This can result in greater retirement savings for employees and greater deductions for companies. Also, companies can use automatic enrollment for 401(k) plans, which means that a percentage of an employee's compensation is added to the plan unless he or she opts out of contributing or asked for a different contribution amount. The funds are added to an approved investment selected by the company (default investment) unless the employee chooses a different investment from the company's menu of options. Note: The basic IRA contribution limit for 2008 is $5,000 (up from $4,000 in 2007), and those who are at least 50 years old by year–end can add another $1,000.
  3. Higher driving write–off
    The IRS optional mileage rate for business use of a vehicle is 50.5¢ per mile in 2008, in addition to parking and tolls. The rate applies whether the vehicle is owned or leased. Using the optional rate avoids the need to track car expenses, but it is still necessary to keep a written record of the mileage and purpose of the travel.
  4. Transportation fringe benefits
    An employer can provide up to $220 per month tax free in parking benefits for an employee this year (up from $215 per month in 2007) and up to $115 per month for transit passes (compared with $110 last year).

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Some issues discussed in the expert forum are complex and continually changing.We recommend you consult a professional advisor about your specific circumstances, needs, and applicable laws. More details.