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What special deductions can I get if I'm self employed?

You may be able to take an immediate expense deduction of up to $250,000 for 2008, for equipment purchased for use in your business, instead of writing it off over many years. Additionally, self-employed individuals can deduct 100% of their health insurance premiums. You may also be able to establish a Keogh, SEP or SIMPLE plan and deduct your contributions (investments).

Can I ever save tax by filing a separate return instead of jointly with my spouse?

You sometimes may benefit from filing separately instead of jointly. Consider filing separately if you meet the following criteria:

• One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses.
• The spouses’ incomes are about equal.

Separate filing may benefit such couples because the adjusted gross income "floors" for taking the listed deductions will be computed separately.

What's the best way to give to charity?

If you’re planning to make a charitable gift, it generally makes more sense to give appreciated long-term capital assets to the charity, instead of selling the assets and giving the charity the after-tax proceeds. Donating the assets instead of the cash avoids capital gains tax on the sale, and you can obtain a tax deduction for the full fair market value of the property.

I have a large capital gain this year. What should I do?

If you also have an investment on which you have an accumulated loss, it may be advantageous to sell it prior to year-end. Capital losses are deductible up to the amount of your capital gains plus $3,000. If you are planning on selling an investment on which you have an accumulated gain, it may be best to wait until after the end of the year to defer payment of the taxes for another year (subject to estimated tax requirements).

What tax-deferred investments are possible if I'm self-employed?

Consider setting up and contributing as much as possible to a retirement plan. These are allowed even for sideline or moonlighting businesses. Several types of plan are available: the Keogh plan, the SEP, and the SIMPLE.

What types of tax relief are available for costs of my children's higher education?

You can't take two different kinds of relief for the same item. You can sometimes take one type of relief for one education item and another type for another item.

Some benefits have income ceilings that bar or limit the relief as taxpayer's income rises.

What's the education tax credit?

There are two types of education credit, Hope Credit and Lifetime-Learning Credit, and you must choose. Briefly: the Hope credit is for the first 2 years after high school, so it fits community college or the first 2 years of a 4 year college. It must be for at least half-time study. The annual credit ceiling is $1,800 per student in 2008 (100% of the first $1,200, 50% of the next $1,200).

The lifetime learning credit fits any undergraduate or graduate study, but study less than half- time must be work-related. The credit ceiling is $2,000 (20% of expenses up to $10,000) per taxpayer per year.

Can my traditional IRA be used for education?

Yes. The 10% penalty on withdrawal under age 59-1/2 won't apply, but ordinary income tax will apply to at least some of the withdrawal.

Can a Roth IRA be used for education?

Yes, generally under the same terms as traditional IRAs. Also, ordinary income tax is somewhat less likely, or may be smaller in amount, than with traditional IRAs.

What tax deductions are available for college education?

Caution: This deduction is scheduled to end with the 2007 tax filing season. Many believe that the deduction could be restored in 2008. No further information is available at this time. The following information relates to 2007 only.

A limited deduction is allowed through 2007 for higher education tuition and related expenses. Deduction up to $4,000 is allowed on if taxpayer’s (modified) adjusted gross income is $65,000 or less ($130,000 or less on a joint return). If taxpayer’s modified adjusted gross income is more than $65,000 but not more than $80,000 (more than $130,000 but not more than $160,000 on a joint return), deduction is allowed up to $2,000.

Business expense deduction is allowed, without dollar limit, for education that serves the taxpayer’s business, including employment. Deduction is also allowed for student loan interest. A taxpayer may not take more than one deduction for the same item.