Converting a Traditional IRA to a Roth?

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Tax Tips Small Business

Deducting the Business Use of Your Home

Don't overlook your home office

If you use a portion of your home for business, you may be able to take a home office deduction whether you are self-employed or an employee. Expenses that you may be able to deduct for business use of the home may include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, painting, and repairs.

Small Business Quick Tip

The Social Security wage base increases to $102,000 in 2008, up from $97,500 for 2007. This means that you are no longer required to withhold social security tax for employees after meeting this threshold. However, you are required to withhold Medicare taxes regardless of the amount of wages paid.

Converting a Traditional IRA to a Roth?

You may want to wait

At some point, taxpayers who have a traditional IRA may wish to convert it to a Roth. Roth IRAs are more flexible in that there are no required minimum distributions when the owner reaches age 70 1/2. In addition, qualified distributions from a Roth IRA are not taxable.

Under current tax law, in the year you convert a traditional IRA to a Roth IRA, you must recognize the amount converted as income on your tax return, with the exception of any basis that may be in the traditional IRA. Depending on the amount, this can significantly impact your tax return. It can even bump you up into a higher tax bracket!

New legislation may make it worthwhile to hold off converting your IRA . For conversions made in 2010 only, the income from these conversions will only be includible in income ratably over the two-year period beginning in 2011. For example, let's say you convert a traditional IRA worth $40,000 to a Roth during 2010. You won't need to report the conversion on your 2010 return, unless you elect to. Your 2011 and 2012 returns will each include $20,000 of income from the conversion.

Generally, if your income is more than $100,000, you currently are not eligible to make a conversion. However, beginning in 2010, this restriction will be eliminated and you'' be able to make conversions regardless of your income or filing status.

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Wednesday, 03 December 2008

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Tax Tips Personal

Did You Move This Year?

Your moving expenses may be deductible

If you moved this year because of a change in your job location or because you started a new job, you may be able to deduct the reasonable expenses of moving household goods and personal effects to your new home. The expenses of traveling to the new home including lodging expenses, are also deductible. Meals, however, are not.

Personal Quick Tip

Not only will you save money at the pump if you buy a hybrid vehicle, you may be eligible for a credit on your income tax return.