IRS Standard Mileage Rate
Under the standard mileage rate method, a taxpayer who owns or leases an automobile (including a van, pickup or panel truck) and uses it for business may claim an expense deduction equal to the standard mileage rate time the number of business miles traveled in the year.
I find that medical and dental offices use this figure frequently for reimbursing employees when they use their automobile for the business.
The new IRS prescribed rate for 2008 is 50.5 cents per mile an increase from the 48.5 cents per mile for 2007.
Payroll Tax
For those of you who are completing payroll for your employees, please take note of the following:
The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2008 will rise to $102,000 from $97,500 in 2007, an increase of 4.6%.
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers – one for Old Age, Survivors and Disability and Insurance (OASDI; commonly known as Social Security tax), and the other for Hospital Insurance (HI; commonly known as Medicare tax).
The FICA tax rate for employees and employers is 7.65% each – 6.2% for OASDI and 1.45% for HI. For self-employed workers, the FICA tax is 15.3% – 12.4% for OASDI and 2.9% for HI. There is a maximum amount of compensation ($102,000 in 2008) subject to the OASDI tax, but no maximum for HI.
On a salary of $102,000 (or more) in 2008, an employee and employer will each have to pay $279 more ($6,324.00 instead of $6,045.00) in Social Security tax this year compared to last.
Election to Expense Capital Purchases
In 2008 up to $128,000 of qualified equipment purchases can be written off in the year it is purchased. This election is phased out once your new asset purchases for the year reach $510,000.
Retirement Plan Limits Remain
The maximum elective deferral amount (voluntary contribution) for 401(k) plans remains the same amount as last year; $15,500 and those who are 50 years or older can continue to contribute an additional $5,000 as “catch-up” contribution.
For those with SIMPLE plans the elective deferral amount also stays the same at $10,500 and for those over 50 an additional $2,500 can be deferred.
Employer Health Savings Accounts
Up to $5,800 may be put into an HSA for those with family coverage and $2,900 for individual coverage. Account owners born before 1953 can put an additional $900 in their account.
Minimum deductibles for HSA’s remain $2,200 for family coverage and $1,100 for individual coverage.
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