California Limits NOL’s and Business Credits

For 2008 & 2009, California taxpayers with net business incomes of $500,000 or more cannot take a net operating loss (NOL) deduction and their use of business credits is limited to 50% of their tax liability. Common credits involved include the Research and Development Credit, Low Income Housing Credit, and Enterprise Zone Credit, and credits not allowed are carried over to future years.

IRS Tax Per Diem Meals & Travel Deductions

Effective Oct. 1, 2008. Reimbursements of an employee's business travel costs (lodging, meal and incidental expenses (M&IE)) at a per diem rate are payroll-and income-tax free if simplified substantiation is provided and the daily rate doesn't exceed the federal per diem rate (the maximum amount that the federal government reimburses its employees) for the locality of travel for that day. While the per diem rates vary by travel destination, employers can make reimbursements at the simplified “high-low” per diem rates, which assign one per diem rate to high-cost areas within the continental U.S., and another to non-high-cost areas. The IRS has issued the “high-low” simplified per diem rates for post-Sept. 30, 2008, travel. An employer may reimburse up to $256 for high-cost localities ($198 for lodging and $58 for M&IE) and $158 for other localities ($113 for lodging and $45 for M&IE). The list of high-cost areas is also updated.

Standard mileage rates down for 2009

The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) is 55¢ per mile for business travel after 2008. That's 3.5¢ less than the 58.5¢ allowance for business mileage that applied in the last six months of 2008. Further, the rate for using a car to get medical care or in connection with a move that qualifies for the moving expense deduction is 24¢ per mile, down 3¢ from the 27¢ per mile allowance for the last half of 2008.

Late Election to Treat All Rental Properties as Single Activity for Material Participation / Loss Deductions

Married taxpayers who acted reasonably in good faith allowed by IRS in Private Letter Ruling to make a late election to treat all their interests in rental real estate as single rental real estate activity, allowing them to meet active participation requirement to deduct losses. – San Diego CPA Michael Fitzsimmons

60-Day IRA Rollover Extended

IRS waived 60-day rollover requirement for failure to roll over funds within 60 days because medical condition impacted taxpayer’s ability to manage his financial affairs. – San Diego CPA Michael Fitzsimmons

Alzheimer’s Patient Guardianship Deductible

IRS has ruled that the costs of establishing a guardianship for an Alzheimer’s patient are deductible medical expenses. [2008-0033]

Energy Efficient Home Improvements Tax Credit

Effective for 2009 (but NOT 2008) Congress reinstated a tax credit for energy efficient home improvements and expanded the credit to cover biomass fuel stoves (whatever those are!). – San Diego CPA Michael Fitzsimmons