FYI.....  MILEAGE RATE CHANGES                                           rates 1/1                   rates 7/1       Purpose                through 6/30/08     through 12/31/08    Business                      50.5                       58.5    Medical/Moving               19                         27    Charitable                      14                         14      Effective October 1, 2006, the minimum wage rate will be $6.95 and the maximum tip credit $4.30.  The minimum tip cash wage will stay at $2.65.  July 1, 2007 the minimum wage rate will be $7.15 and July 1, 2008 the minimum wage rate will be $7.40. Check the status of your refund:  For the IRS, you will need your social security number, filing status and refund amount. IRS   For the State of Michigan you will need your social security number, tax year, AGI and filing status. State of Michigan  Re:  2008 Housing Act The recently enacted 2008 Housing Act includes tax breaks for homebuyers (including a refundable credit for first-time homebuyers for home purchases after Apr. 8, 2008 and before July 9, 2009) and homeowners (including a new state and local property tax deduction for non-itemizers but only for a tax year beginning in 2008), liberalized low-income housing tax credit rules, relaxed tax-exempt bond requirements, eased AMT rules (including changes by which the low-income housing tax credit and the rehabilitation credit offset AMT liability and interest earned on exempt facility, qualified residential rental, and veterans' mortgage bonds won't be preference items for AMT purposes), tax breaks for business (including an election to accelerate AMT and research credits instead of bonus depreciation, revamped REIT rules, and other specialized provisions. The over $14 billion price tag for these tax changes is fully offset with new rules requiring information reporting of payment card and third party network transactions, a delay in the application of worldwide allocation of interest, and reworked 2012 and 2013 estimated tax rules for large corporations. Following are some of the tax measures that may affect your tax planning: Property tax deduction for non-itemizers This measure creates a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions). Here is a brief overview of this new provision: The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes. The deduction is available only for one year--for tax years beginning in 2008. The amount of deduction is as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability), the actual tax benefit will not be substantial, for example, a maximum of $100 to a couple in the 10 percent tax bracket and $150 to a couple in the 15 percent bracket (and only $50 and $75, respectively, to singles in these brackets). Credit for first-time homebuyers The single largest provision in the $15.1 billion package of housing tax incentives in the recently enacted Housing Assistance Tax Act of 2008 (the “Housing Act”) is a measure allowing individuals buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds the tax. However, they are then required to pay the credit back over 15 years. The result is that the credit resembles an interest-free loan that must be repaid to the government. Please call us for specific details of the new credit. Homesale exclusion rules tightened Most homeowners are aware of the homesale exclusion, a provision of the tax laws which provides that homeowners who sell their principal residence typically don't need to pay taxes on as much as $500,000 of their gain if they meet certain conditions. (The $500,000 exemption is the maximum exclusion for a married couple filing jointly; taxpayers filing individually get an exemption of up to $250,000.) To be eligible for the full exclusion, a taxpayer must have owned the home—and lived in it as his or her principal residence—for at least two of the five years prior to the sale. Because of the “principal residence” requirement, vacation or second homes normally don't qualify for the exclusion. However, in what some saw as a loophole, the law permitted taxpayers to convert their second home to their principal residence, live in it for two years, sell it, and take the full $250,000/$500,000 exclusion available for principal residences, even though portions of their gains were attributable to periods when the property was used as a vacation or second home, not a principal residence. The new law closes that “loophole” by requiring homeowners to pay taxes on gains made from the sale of a second home to reflect the portion of time the home was not used as a principal residence (e.g, vacation or rental property). The amount taxed will be based on the portion of the time during which the taxpayer owned the home that the house was used as a vacation home or rented out. The rest of the gain remains eligible for the up-to-$500,000 exclusion, as long as the two-out-of-five year usage and ownership tests are met. The new law in effect reduces the exclusion based on the ratio of years of use as a principal residence to the total time of ownership. For example, if a taxpayer owned a vacation home for ten years, but lived in it as a principal residence only for the final two years prior to sale, the maximum available exclusion would be reduced by four-fifths. Accordingly, a $400,000 gain on the sale that would be eligible for the full exclusion under pre-Act law would be reduced by four-fifths, to $80,000. The good news for current owners of second homes is that the new law is not retroactive. The tightening applies only to sales after 2008. Plus, any periods of personal or rental use before 2009 are ignored for purposes of the provision. Also, the new law doesn't change the rule that allows homeowners to take advantage of the homesale exclusion every two years. Taxpayers can still “home hop” with full tax exclusion if they only own one home at a time. Moreover, the taxpayer still qualifies for capital gain treatment on the amount of gain that cannot be excluded. ___________ We hope this information is helpful. If you would like more details about these provisions or any other aspect of the new law or other tax planning measures, please do not hesitate to call our office at 989-631-3010.