What's New on Your 2008 Tax Return

Column by Barbara Weltman

As you scan the forms and schedules for the 2008 income tax return, be sure to note several changes that can help you save money and make filing easier. Key changes include:

Increased first-year expensing

The cost of business equipment purchased and placed in service in 2008 can be deducted up to $250,000. The limit is reduced if equipment purchases for the year exceed $800,000.

Bonus depreciation

Depreciable property may qualify for 50% bonus depreciation. This can be used in addition to first-year expensing to produce substantial write-offs for qualified equipment purchases.

Business vehicles

The standard mileage rate for business driving in 2008 is 50.5¢ per mile for driving in the first half of 2008 and 58.5¢ per mile for the second half of 2008. The first-year depreciation limit for a car placed in service in 2008 is $10,960 if the car is a new vehicle that qualifies for bonus depreciation, or $2,960 if the car does not qualify for bonus depreciation. Higher limits apply for the purchase of a light truck or van.

Contribution limits

The amount that can be contributed to qualified retirement plans, such as profit-sharing and 401(k) plans, and to health savings accounts (HSAs) in 2008 have been increased.

New tax credits

Certain businesses may be eligible for new tax credits. There is one for employers who continue to pay wages to employees called to active duty and to businesses using agricultural chemicals that undertake certain security measures.