Tax and Financial News for December, 2008
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New Year, New Rates
Standard Mileage and Other Rates for 2009
Standard Mileage and Other Rates for 2009
Every year about this time, the Internal Revenue Service publishes new rates for everything from domestic mileage deductions to foreign housing allowances. Knowing what these rates will be can affect numerous business and personal budgets. This article will give you details on some of those 2009 rates.
Standard Mileage Rates
With all the bad economic news Americans have faced recently, gas prices at the pump have been a silver lining. As of the end of November, gasoline prices have hit a two-year low. Fuel prices affect the cost of nearly everything used by the U.S. consumer, so this is great news, but as gasoline prices decline, so does the standard rate allowed for business and charitable miles.
The standard mileage rate for business purposes during the second half of 2008 was 58.5 cents, up from 50.5 cents during the first half. Beginning January 1, 2009, that rate will drop to 55 cents for all business related travel. This rate is meant to include all costs of operating a vehicle, including gasoline, oil, repairs, insurance and depreciation. Sad to say, but it also includes the cost of detailing the car after the kids have trashed it during holiday travel. The depreciation component is 21 cents per mile.
The tax code also allows a deduction for medical and moving miles driven. Generally, the rate for such deductions is the standard business rate less depreciation. For 2009, the rate will be 24 cents per mile. The deduction for charitable miles driven, which is set by law, will remain at 14 cents per mile.
If you lease your vehicle, you have the choice of using either the business standard mileage rate or a fixed and variable rate allowance (FAVR allowance) to determine deductible expenses. You can also use a FAVR method to reimburse your employees for the use of their vehicles instead of using the business standard mileage allowance. If you use this method, the vehicle cost you use to determine the FAVR deduction cannot exceed $27,200.
Luxury Automobile Depreciation
Although not announced as of this writing, the maximum depreciation amounts for passenger automobiles in 2009 are expected to remain the same as in 2008. This means that the first year deduction will stay at $2,960. The deduction for years two and three will be $4,800 and $2,850, respectively. The annual deduction thereafter will be $1,775. In general, these rules apply to passenger vehicles with a gross unloaded weight of 6,000 pounds or less that are built on a car chassis. This would include any sport utility vehicle built on an automobile chassis, regardless of how the manufacturer classifies it.
Depreciation limits for trucks and vans built on a truck chassis are estimated to decrease slightly in 2009. The current first year depreciation of $3,160 is expected to decrease to $3,060. Depreciation for years two and three is anticipated to be $4,900 and $2,950, respectively, with the amount reducing to $1,775 thereafter.
If you are considering purchasing a new vehicle early in 2009, it may be wise to purchase it before year end. See our March 2008 General Business article for further discussion.
Maximum Social Security Earnings
If you receive Social Security Benefits and are under your normal retirement age, you are limited to the amount you can earn before being required to return a portion of those benefits. In general, for 2009, for every $2 you earn in excess of $14,160 per year you will be required to repay $1 to the Social Security Administration. That amount is presently $13,560. If you reach normal retirement age in 2009, you will forfeit $1 of every $3 you earn in excess of $37,680 ($36,120 in 2008).
Miscellaneous
The personal and dependency deductions for 2009 will be $3,650, $150 higher than 2008.
The standard deduction for use in preparing your personal tax return depends on your filing status and will be as follows for 2009:
The annual gift exclusion will increase from $12,000 in 2008 to $13,000 in 2009.
Conclusion
With the New Year come new rates and limitations affecting your tax planning. Knowing the announced or projected rates and limitations for 2009 can help you make final decisions for 2008. If you have any concerns about your tax liability for 2008, give us a call now to discuss any last minute moves.
Happy Holidays!
Standard Mileage Rates
With all the bad economic news Americans have faced recently, gas prices at the pump have been a silver lining. As of the end of November, gasoline prices have hit a two-year low. Fuel prices affect the cost of nearly everything used by the U.S. consumer, so this is great news, but as gasoline prices decline, so does the standard rate allowed for business and charitable miles.
The standard mileage rate for business purposes during the second half of 2008 was 58.5 cents, up from 50.5 cents during the first half. Beginning January 1, 2009, that rate will drop to 55 cents for all business related travel. This rate is meant to include all costs of operating a vehicle, including gasoline, oil, repairs, insurance and depreciation. Sad to say, but it also includes the cost of detailing the car after the kids have trashed it during holiday travel. The depreciation component is 21 cents per mile.
The tax code also allows a deduction for medical and moving miles driven. Generally, the rate for such deductions is the standard business rate less depreciation. For 2009, the rate will be 24 cents per mile. The deduction for charitable miles driven, which is set by law, will remain at 14 cents per mile.
If you lease your vehicle, you have the choice of using either the business standard mileage rate or a fixed and variable rate allowance (FAVR allowance) to determine deductible expenses. You can also use a FAVR method to reimburse your employees for the use of their vehicles instead of using the business standard mileage allowance. If you use this method, the vehicle cost you use to determine the FAVR deduction cannot exceed $27,200.
Luxury Automobile Depreciation
Although not announced as of this writing, the maximum depreciation amounts for passenger automobiles in 2009 are expected to remain the same as in 2008. This means that the first year deduction will stay at $2,960. The deduction for years two and three will be $4,800 and $2,850, respectively. The annual deduction thereafter will be $1,775. In general, these rules apply to passenger vehicles with a gross unloaded weight of 6,000 pounds or less that are built on a car chassis. This would include any sport utility vehicle built on an automobile chassis, regardless of how the manufacturer classifies it.
Depreciation limits for trucks and vans built on a truck chassis are estimated to decrease slightly in 2009. The current first year depreciation of $3,160 is expected to decrease to $3,060. Depreciation for years two and three is anticipated to be $4,900 and $2,950, respectively, with the amount reducing to $1,775 thereafter.
If you are considering purchasing a new vehicle early in 2009, it may be wise to purchase it before year end. See our March 2008 General Business article for further discussion.
Maximum Social Security Earnings
If you receive Social Security Benefits and are under your normal retirement age, you are limited to the amount you can earn before being required to return a portion of those benefits. In general, for 2009, for every $2 you earn in excess of $14,160 per year you will be required to repay $1 to the Social Security Administration. That amount is presently $13,560. If you reach normal retirement age in 2009, you will forfeit $1 of every $3 you earn in excess of $37,680 ($36,120 in 2008).
Miscellaneous
The personal and dependency deductions for 2009 will be $3,650, $150 higher than 2008.
The standard deduction for use in preparing your personal tax return depends on your filing status and will be as follows for 2009:
| If your filing status is - | Then your standard deduction is – |
| Married, filing jointly | $11,400 |
| Single or Married,filing separately | 5,700 |
Conclusion
With the New Year come new rates and limitations affecting your tax planning. Knowing the announced or projected rates and limitations for 2009 can help you make final decisions for 2008. If you have any concerns about your tax liability for 2008, give us a call now to discuss any last minute moves.
Happy Holidays!
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