Staples Tax Expert Barbara Weltman
Author of several books, including J.K. Lasser's Small Business Taxes. Publisher of Big Ideas for Small Business® and an attorney with more than 25 years experience in taxation.
Tax questions answered by Barbara Weltman
- New for 2008:
Q. What new breaks for my business are available on my 2008 return?
› Answer - Energy–saving tax breaks:
Q. What energy-related tax breaks are available on 2008 returns?
› Answer - Health Savings Accounts:
Q. I've heard there is a low-cost health coverage option that has tax benefits. What is this all about?
› Answer - Special deduction for domestic production:
Q. My business builds homes on spec. Are there any new tax breaks I should know about when filing my 2008 return?
› Answer - Tax breaks for driving the family car:
Q. In 2008, I drove my family car on business. What can I deduct?
› Answer - Write–offs for business purchases:
Q. I've heard that I can deduct the cost of business equipment, but I'm not sure if anything I've purchased in 2008 qualifies. Can you give me a quick list of what write-offs are allowed?
› Answer - Deductions for home offices:
Q. I run a business out of my home. What deductions are allowed for home offices? How do I know if my business qualifies?
› Answer - Q. I didn't receive my stimulus check in 2008. Can I still get money back?
› Answer - Q. I am a self-employed person. Can I use a per diem rate to figure my deduction for travel expenses?
› Answer
Answers to your questions
- New for 2008:
Answer: There are numerous changes on the 2008 tax return, big and small, for self- employed individuals and business owners. You may qualify to expense the cost of equipment purchases up to $250,000. There is also 50% bonus depreciation for equipment purchases in 2008.
› Back to top - Energy–saving tax breaks:
Answer: Some breaks apply on 2008 returns, while others don't take effect until 2009. Homeowners may claim a tax credit on their 2008 return for adding alternative energy improvements to the home, as explained on IRS Form 5695, Residential Energy Credit. Starting in 2009, this credit applies to heat pumps and wind energy property, and there will be a credit for insulation, storm windows and certain other energy improvements. There is also a credit on 2008 returns for purchasing an IRS-certified hybrid vehicle, although certain models no longer qualify for a credit, with details on the IRS Web site (starting in 2009 there is a credit for buying a plug-in electric vehicle). Home builders can claim a tax credit on 2008 returns for constructing energy-efficient homes, as explained on IRS Form 8908, Energy Efficient Home Credit. And owners of commercial reality can claim a tax deduction on 2008 returns if their buildings meet certain energy-saving standards.
› Back to top - Health Savings Accounts:
Answer: If you have a high-deductible health plan (HDHP)–the deductibles must meet IRS-set minimums–you can save on premiums and make tax-deductible contributions to a savings plan called a Health Savings Account (HSA). The policy only covers medical costs above the high deductible, but funds in the HSA can be used to pay medical costs not reimbursed by insurance–withdrawals for this purpose are tax free. If you're covered by an HDHP through work, you can contribute to a HSA if your employer has not done so. To learn more about these plans, see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, at www.irs.gov.
› Back to top - Special deduction for domestic production:
Answer: There is an above-the-line deduction, called the Domestic Production Activities Deduction, for businesses that make, build, grow, extract, record or otherwise create something in the U.S. The percentage used to figure the deduction is 6%. You claim the deduction if you have income from a qualified activity–you don't have to purchase anything or expend any money to receive this tax benefit. However, limitations imposed by the law prevent you from claiming the write-off if you're self-employed with no employees. To determine your eligibility for this deduction and figure its amount, see the instructions for the IRS Form 8903, Domestic Production Activities Deduction, at www.irs.gov.
› Back to top - Tax breaks for driving the family car:
Answer: You can deduct the actual costs of driving your car on business or rely on an IRS-set rate (50.5 cents per mile for the first half of 2008 and 58.5 cents per mile for the second half of 2008). Where you claim the deduction depends on whether you're self-employed or an employee. Either way, however, you must be able to substantiate the number of miles driven on business. For details on deducting car expenses and the type of proof required, see IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses, at www.irs.gov.
› Back to top - Write–offs for business purchases:
Answer: The law lets you write off the cost of equipment purchases made for your business in 2008 up to $250,000. "Equipment" isn't limited to machinery. It includes just about anything (other than realty) you'd otherwise have to depreciate over a number of years, such as computers, copy machines and office furniture, as well as off-the-shelf software. It also includes trucks and vans not suitable for personal use (e.g., there is permanent shelving).
› Back to top - Deductions for home offices:
Answer: Business use of your home if you qualify for the home office deduction. Deductible expenses factored into the home office deduction include:- Rent or depreciation if you own your home
- Utilities
- Maintenance
› Back to top - Answer: Checks under the Economic Stimulus Act were sent to taxpayers who qualified for them based on their 2007 returns. If you did not receive yours, it may have been for one of two reasons:
Your address changed so the check was misdirected. Call the IRS at 866-234-2942 to find out where the check is and to provide new address information. You weren’t eligible for a check. However, if you qualify based on your 2008 income, you can claim a rebate recovery credit. Figure the amount you’re owed on a worksheet in the instructions to your return. Then the credit will reduce the tax you owe or increase your refund (no separate stimulus check will be issued).
› Back to top - Answer: The IRS provides a per diem rate that can be used for lodging, meals and incidental expenses (M&IE) incurred for travel to high-cost areas and to all other areas within the continental U.S. The rate is fixed according to the government's fiscal year starting October 1 (find these rates in IRS Publication 1542, Per Diem Rates, at www.irs.gov). Self-employed individuals cannot use the per diem rates for lodging and M&IE; they can use the rates for M&IE and a special rate for incidental expenses.
› Back to top
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