2008 Income Tax Planning

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Many of us are so focussed on what Obama’s administration and a Dem controlled House and Senate will mean to our taxes next year, that we’re forgetting about 2008.

There were changes in 2008. In fact, the 2008 Economic Stimulus Act had some nice depreciation provisions. And there are also some tax extenders in 2008 that were voted in for one year only. After this year, who knows if we’ll still have them?

Yesterday Megan blogged about the possible disappearance of the 6% production deduction. This might be your last year for that. It’s also the last year for the “heavy vehicle” Section 179 deduction. Not that everyone is lining up to buy a vehicle right now, but if you need one and it’ll qualify, this might be the year to do it. The Section 179 deduction will be half in 2009 from what it is in 2008. And who knows, this could be the last year that you get to take a deduction for your pension plan contributions. (Boy, I hope that one doesn’t pass.)

And if you’re part of my email list, I sent you a tax teaser today. Here’s the question. See if you can come up with the tax saving answer.

Today I worked on a tax plan for a real estate developer who has lost a lot of money in the real estate market. In fact, his 2007 was bad and 2008 looks disastrous. Good thing the years before that were so good.

He has a choice to sell his land this year (2008) at a loss of $40 million or wait until 2009 and get a little more money. He’ll hopefully sell at a loss of about $35 million. Waiting a few months will get him $5 million more.

So, why was my advice, which he readily agreed with, to sell now and take a $40 million loss as long as he can close by 12/31/08?

HINT: It has nothing to do with possible changes in tax law next year. It’s all based on tried and true law that we’ve had for years.

I’ll post the answer in tomorrow’s blog.

There are only about 6 weeks left for tax planning this year. Please don’t get so caught up in the current market fluctuations that you leave money laying on the IRS’s table. Winners know when there is opportunity. The one sure bet is that saving on taxes is sure money in your pocket.

Give Richard a call at 888.592.4769 or drop him at an email at Richard@DKTaxServices.com to find out about our tax-saving strategies. Act quickly though. You’re almost out of time.

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